//
[2016] WASC 69
General information, not legal advice.
Supreme Court of WA
2016-09-29
Pritchard J
Original judgment source is linked above.
P Watts and F M B Reynolds, Bowstead and Reynolds on Agency (Sweet and Maxwell, 19th ed, 2010)
1 Knights Capital Group Ltd (KCGL) is an unlisted public company which manages investment funds. Mr Hodgetts, Mr Britton and Mr Paramor (the Directors) are directors of KCGL. Mr Priest is the company secretary of KCGL.
2 Mr Bajada is the director of Bajada and Associates Pty Ltd (BA). Until 19 July 2013, he was also the managing director of KCGL.
3 In 1996, KCGL entered into an agreement with BA by which BA agreed to provide KCGL with investment and financial management services, and accounting, secretarial and general management services (the Management Agreement). The Management Agreement came to an end in July 2013.
4 KCGL commenced this action against BA and Mr Bajada, alleging a number of breaches of the Management Agreement and of the Corporations Act 2001 (Cth) (the Act), and seeking to recover monies it alleges were overpaid to BA, damages for breach of the Management Agreement, or compensation pursuant to the Act.
5 BA and Mr Bajada deny any breach of the Management Agreement or of the Act. In addition, BA counterclaims against both KCGL, and against Mr Hodgetts, Mr Britton, Mr Paramor and Mr Priest (the Applicants) personally (the Counterclaim).[1] In that part of the Counterclaim which pertains to KCGL, BA contends that KCGL has failed to pay management fees to BA, and that KCGL wrongfully repudiated the Management Agreement, as a result of which BA suffered the loss of the income that BA would have received for its continued performance of the Management Agreement.
6 In the Counterclaim at par [54] [72] and the second prayer for relief (to which I will refer, collectively, as the Challenged Counterclaim), BA claims that the Applicants induced KCGL to wrongfully repudiate the Management Agreement and that they thereby interfered with KCGL's performance of the Management Agreement, and are liable to BA for damages and aggravated damages. BA claims that the Applicants' conduct was not in good faith, or for a proper purpose, or in the best interests of KCGL; was in breach of their duties as officers of KCGL; was outside the scope of their authority as officers of KCGL; and constituted acts in their personal capacities and for their personal benefit.
7 In the present application (the Summary Judgment Application), the Applicants applied to strike out the Challenged Counterclaim pursuant to O 20 r 19 of the Rules of the Supreme Court 1971 (WA) (RSC) on the basis that the Challenged Counterclaim does not disclose a reasonable cause of action. In the alternative, the Applicants applied for summary judgment on the Challenged Counterclaim, pursuant to O 16 r 1 RSC on the grounds that the Applicants have a good defence on the merits.
8 At the hearing of the Summary Judgment Application, counsel for BA conceded that the Challenged Counterclaim was inadequately pleaded and should be struck out. He sought leave to file further amendments to the Challenged Counterclaim. The Applicants resisted that application for leave on the basis that the Challenged Counterclaim did not disclose a reasonable cause of action, and in the alternative, that they have a good defence to the action. They submitted that summary judgment should instead be entered in their favour on the Challenged Counterclaim.
9 For the reasons set out below, I have concluded that the Applicants' Summary Judgment Application should be granted, and that judgment should be entered for the Applicants on the Challenged Counterclaim.
10 In these reasons, I deal with the following matters:
1. Overview of the dispute between the parties to the action
11 It is convenient to set out some further facts surrounding the dispute between the parties. The matters referred to below are drawn from the affidavit evidence relied upon by the parties on the Summary Judgment Application and do not appear to be contentious.
12 An Annual General Meeting of the members of KCGL was held on 1 March 2013 (the AGM). The AGM was initially called at the request of Australian Executive Trustees Limited (AET) (a subsidiary of IOOF Holdings Ltd (IOOF)). AET was the majority shareholder in KCGL at the time. It called for the AGM to be held to consider resolutions to remove two of KCGL's then directors and to replace them with three new directors, namely Mr Hodgetts, Mr Paramor and Mr Britton.[2] It appears that this course of action was pursued because AET held concerns about the management and governance of KCGL.[3] The resolutions were passed and Mr Hodgetts, Mr Paramor and Mr Britton were appointed to the board of directors of KCGL (the Board), joining Mr Bajada, who remained as the Managing Director of KCGL.
13 On 4 March 2013, Mr Hodgetts wrote (on behalf of the Directors) to Mr Bajada, in his capacity as the Managing Director of KCGL. That letter stated that the new Directors 'intend to undertake a full review of the Company and its operations on an urgent basis' and requested that Mr Bajada provide copies of various documents, and other information in relation to KCGL's financial position. The letter also advised that 'until the full review has been completed, with immediate effect, your fellow directors require that you fulfil a "caretaker" role only and do not without the consent of either [Mr Paramor], [Mr Britton] or myself do any of the following', which things included making any material decisions affecting KCGL or its investments.
14 At a meeting of the Board on 14 March 2013, the Board resolved to appoint Mr Priest as company secretary.[4] Mr Priest is a partner of Sothertons Chartered Accountants (Sothertons).
15 Also at the meeting of the Board on 14 March 2013, the Board (Mr Bajada abstaining) resolved to appoint Sothertons to undertake 'an investigative review' (the Review) in accordance with a letter from Sothertons of 11 March 2013, which set out the scope of the Review. A copy of that letter was annexed to Mr Hodgetts' affidavit.[5] That letter was signed by Mr Priest on behalf of Sothertons. It was addressed to 'the Directors' of KCGL. It referred to a meeting between Mr Priest and the directors of KCGL on 6 March 2013, in which there was discussion of the fact that 'the new directors wished to undertake a limited investigative review of a number of aspects of [KCGL]' including the Management Agreement and BA's accrued fees.
16 At a meeting of the Board on 3 May 2013, the Board (Mr Hodgetts abstaining) resolved that expenses incurred by Mr Hodgetts in connection with his investigation of issues relating to the Management Agreement, the finalisation of KCGL's accounts, and familiarisation with the management of KCGL and its interests, should be approved at a full Board meeting.[6] The Board (Mr Hodgetts abstaining) also resolved that a recommendation by Mr Hodgetts concerning the remuneration of Mr Britton, Mr Hodgetts, Mr Paramor and Mr Priest be accepted. The minutes record that Mr Bajada opposed that motion.[7]
17 In addition, at the Board meeting on 3 May 2013, the Board resolved that:
18 The minutes of the Board meeting on 3 May 2013 also record that the meeting considered a recommendation from Messrs Iffla Wade (a firm of solicitors) that Mr Brahma Dharmananda SC be appointed as counsel to advise on the proposed actions to be taken by KCGL in relation to the Management Agreement and to settle various notices prepared by Iffla Wade.[8] The Board resolved to appoint Mr Dharmananda.[9]
19 I note that the minutes record that Mr Bajada had absented himself from the meeting while the latter items on the agenda were discussed.
20 On or about 29 May 2013,[10] the Directors received a copy of a draft report prepared by Sothertons as a result of the Review (the Review Report).[11] The Review Report identified numerous matters which appeared to constitute breaches of the Management Agreement, including overpayments by KCGL of the management fees to which BA was entitled under the Management Agreement, and payments by KCGL for expenses which should have been borne by BA under the Management Agreement (the Alleged Overpayments).[12] However, the Review Report recommended that legal advice be obtained in relation to the construction of various provisions of the Management Agreement; to confirm that BA had made an incorrect calculation of its entitlements; to confirm that BA and Mr Bajada had been overpaid; and to obtain advice as to any remedies open to KCGL.[13]
21 The minutes of a meeting of the Board on 30 May 2013 indicate that KCGL had received a request from shareholders holding at least 5% of the votes at a general meeting to convene a general meeting pursuant to s 249D of the Act to consider two resolutions. The resolutions were to terminate the Management Agreement and to remove Mr Bajada as a director. The minutes record that the Board resolved that Mr Priest should review the register of shareholders to confirm that the requisitioning shareholders in fact held 5% or more of the shares entitled to vote at a general meeting, and if satisfied that that was so, that he should convene a general meeting of shareholders to consider the resolutions.[14]
the Manager [that is, BA] be given notice requiring the Manager to remedy the breaches [of the Management Agreement] and that the notice reserved the right to terminate the Management Agreement if the breaches were not remedied within the required timeframe.
23 I note that the minutes record that Mr Bajada had absented himself from the meeting while these items on the agenda were discussed.
24 A notice of default dated 4 June 2013 was then served on BA by KCGL (the Notice of Default).[16] The Notice of Default was signed by Iffla Wade, purportedly on behalf of KCGL. (There is a dispute between the parties as to whether Iffla Wade was instructed by KCGL or by the directors personally.)
25 The Notice of Default alleged that BA had breached the Management Agreement in numerous respects and required that BA remedy those defaults within 30 days (by repaying the Alleged Overpayments), failing which KCGL reserved its rights to terminate the Management Agreement and to take further action in respect of the alleged breaches.
BA's purported termination of the Management Agreement
26 In a letter to KCGL dated 19 July 2013,[17] BA denied that it had breached its obligations under the Management Agreement as alleged in the Notice of Default or at all. The letter continued:
Since 1 March 2013, the Company has sought to restrict the powers of the Manager without complying with clause 3.4 of the Management Agreement ...
The conduct of the Company, as referred to above, as well as the issue of the Notice evidences a clear intent by the Company not to be bound by the Management Agreement and constitutes a repudiation by the Company of the Management Agreement.
The Manager hereby accepts the Company's repudiation and terminates the Management Agreement with effect from the date of this Notice of Termination.
27 On the same date, Mr Bajada resigned as a director of KCGL.[18]
KCGL's purported termination of the Management Agreement
28 By letter dated 22 July 2013, Iffla Wade, purportedly on behalf of KCGL, wrote to BA advising that BA's termination of the Management Agreement (by its letter dated 19 July 2013) constituted a repudiation of the Management Agreement. Iffla Wade advised that KCGL terminated the Management Agreement for that reason and because BA had failed to remedy some or all of the breaches specified in the Notice of Default.[19]
2. The disputed pleading and BA's concession that relevant paragraphs should be struck out
29 At the time the Summary Judgment Application was filed, an Amended Defence and Counterclaim[20] had been filed. By the time of the first special appointment for the hearing of the Summary Judgment Application, the Counterclaim had been amended on two further occasions.[21] The parties' initial written submissions addressed the Counterclaim which had by then been filed.[22] However, in the course of the hearing, counsel for the Applicants referred to the most recent iteration of the Challenged Counterclaim.[23] In these reasons, it has been convenient to refer to the latter document because the additional amendments it contains do not alter the tenor of the Challenged Counterclaim in any respect which is material for present purposes.
30 The relevant paragraphs of the Challenged Counterclaim are summarised in Appendix 1 to these reasons.
31 The Challenged Counterclaim pleads two causes of action against the Applicants: the tort of inducing a party to a contract to breach that contract (namely the Management Agreement); and the tort of interfering in the contractual relations between KCGL and BA.
32 The Challenged Counterclaim was, with respect, very poorly pleaded. It was difficult to see the connection between the written submissions filed on BA's behalf on the Summary Judgment Application, and the case pleaded in the Challenged Counterclaim. Accordingly, I gave leave to BA to file further submissions summarising its case and the evidence on which it relied as the foundation for that case (by reference to the affidavit material filed for the purposes of the Summary Judgment Application).
33 It appears that although the Challenged Counterclaim relies on the issue of the Notice of Default as the conduct by which the Applicants are alleged to have procured KCGL to breach the Management Agreement, BA seeks to rely on other material facts (most of which are not presently pleaded) which it says permit the inference that when the Notice of Default was issued, the Directors were not acting in good faith in the best interests of KCGL, but rather were acting in the interests of AET or IOOF, or in the interests of another company Folkestone Limited (Folkestone) or in their own best interests.[24]
34 In so far as Mr Priest is concerned, BA's case appears to be that Mr Priest also procured KCGL to issue the Notice of Default, or assisted the Directors to do so, and in that way also interfered with the contractual relations between KCGL and BA. It appears that BA also wishes to contend that other aspects of Mr Priest's conduct permit the inference that when the Notice of Default was issued, Mr Priest was not acting in the best interests of KCGL and its shareholders, but rather for his own personal interest or benefit, or in the interests of Sothertons, or in the Directors' pursuit of the interests of AET or IOOF, or of Folkestone, or of the Directors' own best interests.[25]
35 Counsel for BA submitted that BA should have leave to re-plead, effectively to include matters raised in Mr Bajada's affidavit in opposition to the Summary Judgment Application and in the written submissions filed on BA's behalf.[26] He submitted that the Challenged Counterclaim '[formed] a skeleton which need[s] to be bolstered by the background information which has been outlined in the affidavit [of Mr Bajada] and in the submission'.[27] The submissions by counsel for BA thus focused on the case BA intended to advance, rather than its case as presently pleaded in the Challenged Counterclaim. In dealing with the Summary Judgment Application, I have taken into account BA's intended case, having regard to those submissions and the affidavit evidence adduced by the parties.
The concession that the Challenged Counterclaim should be struck out
36 As I have already mentioned, counsel for BA conceded that the Challenged Counterclaim was 'deficient' and should be struck out but submitted that BA should have leave to re-plead.
37 Having regard to the well-established principles in relation to strike out applications,[28] the concession that the Challenged Counterclaim should be struck out was properly made. However, the question of leave to re-plead falls away in view of my conclusion that summary judgment should be granted on the Challenged Counterclaim.
3. Grounds for the application for Summary Judgment Application
38 The Applicants advanced three grounds for their application for summary judgment, namely:
(a) the issue of the Notice of Default was not a repudiation of the Management Agreement;
(b) although termination of the Management Agreement may have been the ultimate effect and (arguably) the design of the Notice of Default, the operative intention of the Applicants was not to breach the Management Agreement; and
(c) the conduct of the Applicants was conduct in their capacity as officers of KCGL and therefore the conduct of the company, for which they cannot be personally liable. (This ground encompassed the submission that BA had no evidence to support its case that the conduct of the Applicants could be characterised as conduct other than conduct in their capacity as officers of KCGL.)
4. The principles applicable to summary judgment applications
39 A defendant to an action may apply to the court for summary judgment pursuant to O 16 r 1 RSC. Although the Applicants are defendants to the Counterclaim, in my view it is open to them to bring the present application pursuant to O 16 r 1.[29] BA did not contend otherwise.
40 O 16 r 1 requires the court to be satisfied either that the action is frivolous or vexatious, or that the defendant has a good defence on the merits, or that the action should be disposed of summarily. The principles in relation to the determination of applications for summary judgment are well established. A party should not ordinarily be denied the opportunity to have his or her case determined following trial, and for that reason, the jurisdiction to grant summary judgment should be reserved for the clearest of cases, where there is a high degree of certainty about the ultimate outcome of the action if it were allowed to go to trial.[30] In other words, the question is whether, on the material before the court, it has been demonstrated that the plaintiff's action should not be permitted to proceed to trial because it is apparent that it must fail.[31]
41 However, that does not mean that summary judgment will be given only where the case is so hopeless as not to require argument. Extensive argument may be necessary to demonstrate that a party's case is so clearly untenable that it cannot possibly succeed.[32]
42 The defendant bringing the summary judgment application bears the legal onus of establishing that there is no serious question to be tried on any cause of action raised by the plaintiff.[33] Under O 16 r 1(2) the defendant is required to file an affidavit verifying the facts upon which the application is based.
43 The plaintiff is also entitled, under O 16 r 2, to file an affidavit to show cause against the application. If the plaintiff shows cause against the application for summary judgment by filing an affidavit in response, the plaintiff may assume an evidentiary onus to show why summary judgment should not be given. In other words, the plaintiff needs to show, on the evidence, that there exists a 'triable issue'.[34] In doing so, the affidavit must 'condescend upon particulars' that is, it must set out facts which establish that it is reasonable to permit the plaintiff to pursue the action.[35]
44 While the plaintiff may assume an evidentiary onus, the defendant retains the legal onus of demonstrating that there is no real question to be tried.[36]
5. Why two of the grounds for the Summary Judgment Application do not succeed
45 It was apparent from the submissions of counsel that BA's intended case is that the Board's resolution to issue the Notice of Default, when viewed in light of the surrounding circumstances, supports the conclusion that the Notice of Default should be viewed as a 'non-discretionary ultimatum' by which KCGL signalled that it was of the view that it was entitled to terminate the Management Agreement, that it intended to do so, and thus that the issue of the Notice of Default should properly be viewed as a repudiation of the Management Agreement.[37]
46 The term 'repudiation' may be used in a number of different senses. It may refer to conduct (express or implied) which evinces an unwillingness or an inability to render substantial performance of the contract, or it may refer to a breach of a contract which justifies termination by the other party.[38] The present case involves an alleged instance of the former. The principles governing a repudiation of this kind were discussed by Finn J in GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd.[39] His Honour said:
(i) A party will have repudiated a contract if, by words or conduct, it evinces an intention no longer to be bound by it or if that party shows it intends to fulfil the contract only in a manner substantially inconsistent with its obligations and not in any other way ...
(ii) The party's conduct is to be judged objectively by reference to the effect it would be reasonably calculated to have upon a reasonable person ...
(iii) A party that acts on a genuine but erroneous view of its obligations under the contract will not for that reason alone have repudiated it. That party may still be willing to perform the contract according to its tenor; to recognise its heresy; or to accept an authoritative exposition of the contract ... But persistence in an untenable construction will ordinarily be regarded as repudiatory ... (citations omitted)
47 Counsel for the Applicants submitted that the resolution to issue the Notice of Default was not capable of constituting a repudiation of the Management Agreement because the notice did not manifest an intention not to comply with the Management Agreement, but rather simply reserved KCGL's rights to act in accordance with the Management Agreement if BA's (alleged) breaches of the Agreement, as identified in the notice, were not remedied. Furthermore, counsel for the Applicants pointed to the fact that the resolution which was in fact made at the meeting of the Board on 30 May 2013 was not to terminate the Management Agreement, but rather simply to issue the Notice of Default, with reservation of the right to terminate if the breaches were not remedied.[40] Finally, counsel for the Applicants submitted that it was BA, not KCGL, which first terminated the Management Agreement, and thereby repudiated it.[41]
48 I am not persuaded that summary judgment on the Challenged Counterclaim should be granted on those grounds, for two reasons. First, the determination of BA's case will require the determination of the proper construction of the Management Agreement and of the Notice of Default. The latter determination will require consideration of the evidence concerning the circumstances in which the Notice of Default was given. The question will be whether the terms of the Notice of Default, understood in the context in which that notice was issued, manifested an intention by the Board not to perform the Management Agreement. That question should be determined in light of all of the evidence at trial.
49 Secondly, in that part of the Challenged Counterclaim which pertains to KCGL, BA alleges that the issue of the Notice of Default constituted a wrongful repudiation of the Management Agreement by KCGL itself.[42] Whether the Notice of Default constituted a wrongful repudiation of the Management Agreement is thus an issue which will need to be resolved at trial in any event. That consideration, of itself, militates strongly against the grant of summary judgment on these grounds.
6. Can the applicants be liable for the causes of action pleaded in the Challenged Counterclaim?
50 The conduct which BA alleges constituted the Applicants' procurement of KCGL's breach of contract, and their interference with its contractual relations, was the resolution made on 30 May 2013 by the Board (comprising Mr Hodgetts, Mr Paramor and Mr Britton, with Mr Bajada having absented himself from the discussion) to issue the Notice of Default to BA. When they voted in favour of that resolution, Mr Hodgetts, Mr Paramor and Mr Britton were directors of KCGL. At the time, Mr Priest was the company secretary of KCGL.
51 The Applicants say that BA's case against them cannot succeed for two reasons. First, the Applicants contend that the conduct on which the causes of action in the Challenged Counterclaim are based was conduct which was undertaken by them in their capacity as officers of KCGL, and therefore must be equated to conduct of KCGL itself. They say that they cannot be personally liable for the tort of procuring a breach of contract by KCGL or for interfering with its contractual relations. Secondly, the Applicants contend that if those causes of action can be pleaded as against them, BA has not pointed to the existence of any facts which, if proved, would be capable of establishing those causes of action.
52 The thrust of the submissions of counsel for BA was that BA can point to evidence sufficient to establish that when the Directors resolved to issue the Notice of Default, and when Mr Priest allegedly assisted them to do so, the Applicants were not acting in good faith in the best interests of KCGL but rather were acting in the interests of AET or IOOF, or of Folkestone, or in their own best interests. BA's case is that in those circumstances, the Applicants' conduct cannot be regarded as conduct in their capacity as officers of KCGL and that they can therefore be liable for the tort of procuring a breach of contract by KCGL, or for the tort of interfering with its contractual relations.
Whether it is open to BA to contend that the Applicants committed the torts of inducing a breach of contract or interfering with contractual relations
53 There was no dispute that the elements of the tort of procuring a breach of contract are those set out by the Full Court of the Federal Court in Daebo Shipping Company Ltd v The Ship Go Star.[43] The gravamen of the tort is the defendant's intention to induce or procure the breach in the knowledge that such a breach will interfere with the plaintiff's contractual rights.[44]
54 There was also no dispute that the principles in relation to the tort of interference with contractual relations are those summarised by Master Newnes (as he then was) in Boase v Seven Network (Operations) Ltd.[45]
55 In a case where, as here, the interference with contractual relations is an actual breach of contract, there is little material difference in the case which needs to be established for the purposes of either tort. In this case, BA must establish that the Applicants knew of the Management Agreement between BA and KCGL; that the issue of the Notice of Default constituted a breach of the Management Agreement; that the Applicants knew that issue of the Notice of Default would constitute a breach of the Management Agreement; that the Applicants procured KCGL to issue the Notice of Default to BA; that the Applicants intended to induce KCGL to breach the Management Agreement by issuing the Notice of Default; and that that breach of the Management Agreement caused loss or damage to BA.
56 What is in issue in this application is whether the Applicants can be liable for either tort.
57 It is a trite proposition that a company can only act through its officers and agents.[46] The application of that principle has been held to have the consequence that where a director of a company, acting within the scope of his or her authority, causes the company to breach a contract with a third party, the director cannot be held liable for inducing or procuring the company to breach the contract[47] (the rule in Said v Butt).
58 Counsel for BA submitted that the Applicants' conduct in this case fell outside the scope of the rule in Said v Butt. BA's intended case is that when the Directors resolved to issue the Notice of Default they did not act in good faith in the best interests of KCGL but rather were acting in the interests of AET or IOOF, of or Folkestone, or in their own best interests, and that Mr Priest was acting in his personal interest, or in the interests of Sothertons, or in the interests of the Directors (or the interests in which the Directors were acting).[48]
59 For completeness, I note that although Said v Butt was a case concerning the tort of procuring a breach of contract, the parties appeared to proceed on the basis that the rule in Said v Butt also applies in relation to actions for the tort of interference with contractual relations. Although the parties did not refer to any authority in which the rule in Said v Butt has been applied in the context of the tort of interfering with contractual relations, there is authority for the proposition that the defendant in an action of that kind must be a third party, who stands outside the contractual relationship being interfered with.[49] At least in a case where the interference in contractual relations is said to have occurred through an actual breach of contract, it is difficult to see any rationale for why the rule in Said v Butt would not apply to the tort of interference with contractual relations also. I am content to proceed on that basis.
60 In order to explain the basis for the case advanced by BA, it is necessary to consider the basis for the rule in Said v Butt and its application in Australia.
61 In Said v Butt,[50] Mr Said brought an action against Sir Alfred Butt, the managing director of Palace Theatre Ltd, for procuring a breach of contract. Mr Said alleged that the contract between him and the company arose by virtue of Mr Said's acquisition of a ticket to a play being performed at the theatre. Sir Alfred had directed that Mr Said be refused entry to the theatre. McCardie J held that Mr Said had not established that a contract existed between himself and the company, and that he had consequently failed to prove that Sir Alfred had caused any breach of the alleged contract in refusing Mr Said admission to the theatre.[51] However, McCardie J went on to consider whether Mr Said could have succeeded had he established that there existed a valid contract between him and the Palace Theatre Ltd and that that contract had been breached.[52] McCardie J concluded that Sir Alfred Butt acted within his wide powers as managing director when he directed that the plaintiff should be refused admission to the theatre, and that when he did so he 'meant to act and did act bona fide for the protection of the interests of his company'.[53]
62 His Honour noted that Lumley v Gye,[54] and the line of cases which established the elements of the tort of procuring a breach of contract, involved defendants who stood wholly apart from the parties to the contract.[55] His Honour then explained why it was not possible for an agent of a principal to commit the tort of procuring a breach of a contract to which the principal was a party. His Honour observed:[56]
the servant who causes a breach of his master's contract with a third person seems to stand in a wholly different position [to that of a stranger to the contract]. He is not a stranger. He is the alter ego of his master. His acts are in law the acts of his employer. In such a case it is the master himself, by his agent, breaking the contract he has made, and in my view an action against the agent under the Lumley v Gye principle must therefore fail, just as it would fail if brought against the master himself for wrongfully procuring a breach of his own contract.
63 For that reason, McCardie J concluded that the action brought by Mr Said was not sound, and observed:[57]
[I]f a servant acting bona fide within the scope of his authority procures or causes the breach of a contract between his employer and a third person, he does not thereby become liable to an action of tort at the suit of the person whose contract has thereby been broken. I abstain from expressing any opinion as to the law which may apply if a servant, acting as an entire stranger, or wholly outside the range of his powers, procures his master to wrongfully break a contract with a third person. (emphasis added)
64 The words I have emphasised in this passage are the basis for what BA submits marks the limits of the rule in Said v Butt.
65 The rule in Said v Butt was applied in Australia in O'Brien v Dawson.[58] In that case, a company had entered into two contracts with Mr O'Brien, namely an agreement to sublet to him two picture theatres, and a subsidiary agreement to let him into possession as its agent pending completion of the leases. After he had been in possession for some time (pursuant to the subsidiary agreement), the company claimed that he had committed a breach of the main agreement as to the time for its performance, which entitled the company to terminate the agreement. It did so, and resumed possession. Mr O'Brien brought an action against the company and two of its directors, alleging that the directors had conspired with the company to injure him. Mr O'Brien was successful at trial, but the judgment was set aside on appeal to the Full Court of the New South Wales Supreme Court, in part because the Court held that there was no evidence that the directors did not believe that the company was legally entitled to terminate the contract.
66 In the course of discussing the elements of the tort of conspiracy to breach a contract, Jordan CJ (with whom Halse Rogers and Roper JJ agreed) discussed the question whether the directors could be liable, with the company itself, for that tort. In doing so, his Honour referred to the rule in Said v Butt by way of comparison. He said:[59]
The next question is whether, if an ordinary limited liability company is a party to a contract, and its directors acting as such, and in the course of conducting the company's business at a Board meeting, resolve that the company shall refuse to perform a contract to which it is a party, the directors knowing that the refusal cannot be legally justified, and effect is given to this resolution, the directors concerned are guilty of the tort ... of conspiracy. I am of opinion that in such a case it is entirely artificial to speak of the directors as 'procuring' the company to break its contract in the sense in which this word is used in the Lumley v Gye type of case. An incorporated company is a figment of the law. It is incapable of acting except through agents. Its directors are persons who have been authorised by the constituent members of the corporation to cause acts to be done on its behalf. They are its agents who have power to control its acts. It cannot act at all except through them or through some other authorised agents. They are not in the position of outsiders who are influencing the independent volition of a contracting party who is capable of exercising volition for himself. It is their volition and theirs only which determines the making, the performance, or the breach of the company's contracts ... [T]here is authority for the proposition that the fact that one or more directors of a company, acting as such, are the instruments by which the company, without just cause, refuses to perform a contract does not confer on the other party to the contract a right to sue the directors in tort on the footing that they have procured a breach of contractual rights: Said v Butt ...
67 That decision was the subject of an appeal to the High Court, which was dismissed. Williams J (with whom Rich J agreed) held that Jordan CJ had not erred in concluding that there was no evidence that the directors knew that the company was not entitled to terminate.[60] His Honour did not discuss the question whether directors could be liable, together with the company, for the tort of conspiracy, or the general rule that a director cannot be liable for the tort of procuring a breach of contract by the company. However, the other two members of the Court did discuss these principles. Starke J observed:[61]
A company 'cannot act in its own person for it has no person'. So it must of necessity act by directors, managers, or other agents. The company, if it were guilty of a breach of its contracts in this case, acted through its director the respondent Doyle but it is neither 'law nor sense' to say that Doyle in the exercise of his functions as a director of the company combined with it to do any unlawful act or become a joint tortfeasor. Again, it is equally fallacious to assert that Doyle knowingly procured the company to break its contract. The acts of Doyle were the acts of the company and not his personal acts which involved him in any liability to the plaintiff. (citations omitted)
68 However, his Honour went on to note:[62]
But I would add that it does not follow that a director of a company would escape personal liability under cover of the company's responsibility if he himself became an actor and invaded the plaintiff's rights, as by trespassing on his land, or seizing his goods and so forth. (citations omitted, emphasis added)
69 McTiernan J also referred to Said v Butt and noted that an action for the tort of procuring a breach of contract could not lie against a company for breach of its own contract or against its directors. However, his Honour noted that that would only be the position if the directors:[63]
were acting in pursuance of their authority as directors (Said v Butt). There is no evidence that they were not acting in pursuance of that authority. (emphasis added)
70 BA's case is that the rule in Said v Butt does not apply where an officer of a company engages in conduct which would ordinarily be within the scope of the officer's authority such as when a director votes on a resolution at a meeting of the board of directors[64] if it can be said that the director's conduct was not engaged in in good faith or in the best interests of the company. Counsel for BA submitted that it was arguable that this formulation fell within an 'exception' to the rule in Said v Butt,[65] was consistent with the limits of the principle as recognised in O'Brien, and was 'an arguable point of law that has otherwise not been determined in Australia'.[66]
71 BA sought to draw support for its case from Idoport Pty Ltd v National Australia Bank Ltd.[67] In that case, Einstein J granted leave to a plaintiff to replead its cause of action against two directors of a company for procuring a breach of the company's contract with a third party, on the basis that the acts in question were not in the interests of the company. Although his Honour 'very much doubted'[68] the correctness of the proposition that acts of a director, which were apparently within his or her authority as a director, but which were carried out other than in the interests of the company, could result in the director being liable for inducing a breach of contract, nevertheless his Honour considered that the questions of principle raised by the pleading were appropriate for decision as part of the final judgment of the court.[69]
72 In the course of his judgment, his Honour referred to Canadian[70] and New Zealand[71] cases in which it had been accepted that a director could be liable for procuring a breach of contract by a company if it were shown that the director's dominant concern was to deprive the plaintiff of his or her contractual benefits. However, his Honour noted that no Australian case had dealt with a claim that a director was liable for the tort of inducing a breach of contract on the basis that the acts of the director were not bona fide in the interests of the company.[72] The Idoport case does not appear to have proceeded to trial.
73 Counsel for BA also relied on the decision of Hodgson CJ in Eq in Tsaprazis v Goldcrest Properties Pty Ltd.[73] In Tsaprazis, the plaintiffs leased premises from a company, Dernu Pty Ltd. The plaintiffs used the premises as a restaurant. The lease contained covenants that the landlord would maintain the premises in a structurally sound condition, and that the landlord could terminate the lease in the event of damage to the premises which the landlord considered made repairs impracticable or undesirable. The property was sold and the purchaser (a company, Goldcrest Properties Pty Ltd) assumed the landlord's obligations under the lease. Following water damage to the premises, Goldcrest terminated the lease on the basis that it considered it impracticable or undesirable to repair the premises. The plaintiffs brought an action against Dernu and Goldcrest, and against Mr Micola, a director and shareholder of Dernu. The cause of action alleged against Mr Micola was a breach of a common law duty of care to ensure that the landlord company complied with its obligations under the lease to keep the premises in good repair, so as to avoid the plaintiffs suffering economic loss. Mr Micola applied to strike out the pleading against him. Hodgson CJ in Eq struck out the pleading, because it did not plead a proper basis for the existence of a duty of care on Mr Micola's part. In reaching that view, his Honour referred to the contractual context, and to the general principle that:[74]
only the company is liable under such a contract, not its shareholders or directors ... Consistently with this general approach, directors are not liable for the tort of inducing breach of contract, where, in exercising their functions as directors, they have caused the company to breach its contract: see Said v Butt and O'Brien v Dawson.
74 Tsaprazis does not advance BA's position. The case did not involve an action for the tort of inducing a breach of contract, or interference with contractual relations. The references by Hodgson CJ in Eq to Said v Butt and O'Brien v Dawson were simply obiter observations made by way of comparison to demonstrate the common law's reluctance to impose liability on directors in other contexts apart from that of the common law duty of care.
75 Counsel were unable to identify any Australian case in which a director of a company has been found liable for the tort of inducing a breach of contract between the company and a third party, or for interference with contractual relations, either on the basis that the individual was acting outside the scope of his or her authority as a director, or on the basis that the individual was exercising the powers of a director but was not acting bona fide in the interests of the company.
76 Counsel for BA did not explain precisely the basis on which it could be determined that a director's conduct was not bona fide in the interests of the company. In the Challenged Counterclaim, and in the submissions, a number of different possibilities appeared to be canvassed. By way of example, counsel for BA submitted that where a director's actions had mixed purposes, the director's conduct would be 'invalidated' if an impermissible purpose caused the director to engage in the conduct.[75] He also submitted that a court might conclude that a director was not acting bona fide in the interests of the company if the 'director has procured a company to breach a contract through a breach of his director's duties ... [t]his proposition remains to be further explored or tested by the court.'[76] Counsel for BA also submitted that in determining whether an officer of a company was acting other than bona fide in the interests of the company, some assistance could therefore be drawn from the principles summarised by Ipp J in Permanent Building Society (In Liq) v Wheeler.[77] Counsel for BA acknowledged that:[78]
breaches of director's duties are ordinarily enforceable by the company and not third parties. However, where a director breaches his duties this is demonstrative that the director acted outside of his powers. Where a director breaches his duties to act for a proper purpose or in good faith, this accords with the proposition that the director is not acting bona fide in the scope of his authority. (emphasis in original)
77 I have considerable reservations as to whether it is open to BA to pursue the Challenged Counterclaim on the basis set out above. The rule in Said v Butt emerges from obiter in the judgment of McCardie J. Further, the limits of the rule in Said v Butt upon which BA seeks to rely are set out in obiter of only two of the members of the High Court in O'Brien v Dawson. Furthermore, within the factual context in O'Brien v Dawson (where the appeal to the High Court was dismissed expressly on the basis that that dismissal was without prejudice to the plaintiff's rights to pursue other actions against the defendants, including actions for other torts) it appears to be arguable that both Starke J and McTiernan J were simply intending to emphasise that the mere fact of being a director of a company does not absolve a person from liability as a joint tortfeasor with a company (apart from liability for the tort of procuring a breach of contract). Furthermore, at least in a case where the director's conduct is of a kind which prima facie is within the scope of his or her authority, the evidentiary difficulties in establishing that the director's conduct was not in the best interests of the company may well render success more of a theoretical, rather than a real, possibility.
78 Nevertheless, despite these reservations, I am not persuaded that it is beyond argument that the rule in Said v Butt is subject to the limits for which BA contends. I have reached that view for three reasons.
79 First, on the face of what was said in both Said v Butt and in O'Brien v Dawson (in the passages italicised above), it is difficult to deny the possibility, at least in theory, that in a case where it is established that a director is acting outside the scope of his or her authority as a director, and in doing so engages in conduct which procures the company to breach a contract with a third party, the director may not be able to rely upon the rule in Said v Butt to resist liability for that tort.
80 Secondly, although there have been a number of cases in which it has been recognised that the rule in Said v Butt applies in Australia,[79] there has been little case law concerning the application of the rule. The scope of the rule in Said v Butt thus remains largely unexplored.
81 Thirdly, outside the realm of the torts of procuring a breach of contract, or interfering with contractual relations, a director can be personally liable for a tort committed by the corporation. Directors may also be liable in equity, or under some statutes, for procuring a corporation to engage in a breach of trust,[80] or a breach of a statutory duty.[81] And it has been observed that 'the principle in O'Brien v Dawson does not sit entirely comfortably with the body of law which recognises that a director may be personally liable for procuring other wrongs by the corporation'.[82] That suggests that there may be room for further judicial exploration of the basis for, and limits of, the rule in Said v Butt, and the place of that rule within the common law's approach to the tort liability of directors more generally. Furthermore, the test for determining when a director is involved in the company's tortious conduct beyond merely being a director of the company, so that the director may be found liable as a joint tortfeasor with a company, for torts committed by that company, is not settled.[83] The unsettled state of the law in that context also provides some support for the view that the potential development of the limits of the rule in Said v Butt should not be stifled by summary judgment in this case.
82 For present purposes, it suffices to say that the fact that the legal principles concerning the application and scope of the rule in Said v Butt are not yet settled weighs strongly against the grant of summary judgment. It is well established that the court should leave the determination of questions of law for trial, rather than undertake that determination in the course of an application for summary judgment.[84] Had that been the only basis for the Summary Judgment Application, I would have refused to grant summary judgment.
7. Why the application for summary judgment on the Challenged Counterclaim should be granted
83 However, as I explain below, having reflected on the affidavit evidence relied upon by the parties, together with the submissions by counsel for BA as to the nature of the case that BA seeks to advance, I have come to the view that BA has not demonstrated that there exists a 'triable issue' and the Challenged Counterclaim should therefore be dismissed. I have reached that view for three reasons. First, the premise for the Challenged Counterclaim is inconsistent with the premise for BA's cause of action against KCGL. Secondly, BA has not identified any evidence which, if accepted, would be capable of establishing that the Applicants acted other than in the best interests of KCGL. Thirdly, at least in so far as the Challenged Counterclaim pertains to Mr Priest, BA has not identified any evidence that Mr Priest, as the company secretary, participated in the conduct which is said to have procured the alleged breach of contract, namely the resolution issue of the Notice of Default.
(i) The premise for the Challenged Counterclaim is inconsistent with the premise for BA's cause of action against KCGL
84 In the Further Re-Amended Defence and Counterclaim, BA's cause of action against KCGL is that KCGL wrongfully repudiated the Management Agreement and thereby caused loss to BA. BA's case is that the wrongful repudiation of the Management Agreement occurred when KCGL issued the Notice of Default.[85] In other words, BA seeks to rely on the conduct of the Directors (in making the resolution at the Board meeting on 30 May 2013 to issue the Notice of Default) as binding on KCGL.
85 In contrast, in the Challenged Counterclaim, BA's cause of action against the Directors for the tort of procuring the breach by KCGL of the Management Agreement is premised on the propositions that the Directors procured KCGL to issue the Notice of Default,[86] and that in doing so the Directors were acting outside the scope of their authority as directors and not in the best interests of KCGL.[87]
86 BA thus seeks to contend that the Directors' conduct was within the scope of their authority for the purpose of establishing KCGL's liability for breach of the Management Agreement, and at the same time to contend that the Directors' conduct was outside the scope of their authority for the purpose of establishing that they are liable for the tort of procuring that alleged breach of the Management Agreement. While the cases are run in the alternative, in my view it is not open to BA to advance both claims where the evidentiary foundation for them is so fundamentally inconsistent. The Applicants should have summary judgment on the Challenged Counterclaim for that reason.[88]
87 In this section of my reasons, I deal with the following matters:
(I) overview of the evidence on the Summary Judgment Application, and of the objections to that evidence;
(II) why the Applicants' evidence, if accepted at trial, would establish a prima facie case that the Applicants were acting in the best interests of KCGL when the Directors resolved to issue the Notice of Default;
(III) why BA did not discharge its evidentiary onus of demonstrating that a triable issue exists on its case against the Directors; and
(IV) why BA did not discharge its evidentiary onus of demonstrating that a triable issue exists on its case against Mr Priest.
88 Each of the Applicants swore an affidavit in support of the Summary Judgment Application.
89 Mr Bajada also swore an affidavit in opposition to the Summary Judgment Application. BA also relied on an affidavit sworn by one of its solicitors, annexing correspondence which disclosed that there is a dispute between the parties in relation to whether Iffla Wade was engaged by the Directors on behalf of KCGL, or by the Directors in their personal capacities. BA also relies on a concession made by counsel for the Applicants in the course of his oral submissions that the Board did not make a resolution that Iffla Wade be appointed the solicitors for KCGL.
90 Numerous objections were made to the affidavit evidence. I have dealt with the evidence, having regard to the objections, in the following way.
91 First, BA objected to various paragraphs in the Applicants' affidavits on the basis that those paragraphs contained self-serving statements, as to each Applicant's belief that he was acting in the best interests of KCGL and its shareholders. I have approached this evidence on the basis that it simply constitutes evidence of the subjective belief of each of the Applicants as to the basis for his conduct.
92 Secondly, BA objected to various paragraphs in the Applicants' affidavits on the basis that those paragraphs contained evidence as to the content or import of particular documents. I have given no weight to that evidence, but have instead had regard to the content of the documents themselves (which were annexed to Mr Hodgetts' affidavit).
93 Thirdly, BA objected to certain paragraphs in the Directors' affidavits on the basis that they contained hearsay (as to conversations in which some of the Applicants were advised that AET and IOOF had concerns about the performance of KCGL under Mr Bajada's leadership, and the basis for those concerns). I have taken this evidence into account only as evidence of each Director's understanding of the reasons why AET and IOOF approached him to stand for election as a director. I have not taken such statements into account as evidence of the truth of the underlying facts.
94 Fourthly, the Applicants objected to numerous paragraphs within Mr Bajada's affidavit on the basis that they were speculative, did not constitute evidence, or were in the nature of Mr Bajada's opinions or constituted submissions. To the extent that Mr Bajada sets out his views in relation to the motivation or purpose for the conduct of the Applicants, or of IOOF or AET, or Folkestone, I have taken his evidence into account simply as his belief, based solely on the matters to which he refers, and as yet untested.
95 The Applicants' evidence dealt with the key issues raised in the Challenged Counterclaim. It is convenient to outline the Applicants' case by reference to those issues.
96 Mr Hodgetts deposed that he is the executive director of KCGL and its related entities. Mr Hodgetts deposed to his previous experience in corporate management and regulatory roles, including roles as a director of various companies. Mr Hodgetts deposed that he is currently the executive chairman of Folkestone Funds Management Limited and a nonexecutive director of Folkestone Investment Management Limited. Mr Hodgetts deposed that he has known Mr Paramor professionally for many years.
97 Mr Paramor deposed that he is a director of a number of Australian companies, and is the managing director of Folkestone.
98 Mr Britton set out his experience in corporate management and regulation, including his role as the director of a number of companies.
99 Mr Priest deposed that he has been a partner of Sothertons since 1988. Mr Priest deposed that he and Mr Paramor had had about a 30year professional association, acting as director and secretary on many companies.
100 Mr Hodgetts deposed that in mid2012 he was approached by Mr Sweeney, a director of a company which subsequently became known as Folkestone Limited. Mr Hodgetts deposed that Mr Sweeney told him that AET and IOOF had 'concerns over the management and direction of KCGL'[89] and were interested in replacing the existing board and executive management of KCGL, and that Mr Bajada had refused a request to resign.[90] Mr Hodgetts deposed that he agreed to stand for election to the Board together with Mr Britton and Mr Paramor.
101 Mr Paramor deposed that in 2012 he was approached by Mr Hilton, who worked for IOOF, and was informed that IOOF held concerns about KCGL's performance under the leadership of Mr Bajada, who had rejected a request to resign as a director. Mr Paramor attended a meeting between Mr Bajada and representatives of IOOF in May 2012. Mr Paramor deposed that IOOF subsequently asked him to accept its nomination as a director of KCGL, and he agreed to do so.
102 Mr Britton deposed that in May 2012 he was approached by Mr Sweeney, who told him that shareholders in KCGL were unhappy with the performance of the company, its board and of its Managing Director, Mr Bajada. Mr Britton deposed that Mr Sweeney invited him to join 'a ticket [with Mr Paramor and Mr Hodgetts] to replace 2 of the 3 then current members of the board at a general meeting of KCGL'.[91] Mr Britton said that 'in the most general terms I understood that subject to a strategic review, the objective of the exercise was to ultimately re-unite investors with what was left of their capital in a cost effective manner'.[92]
103 When he gave his consent to be appointed as a director, Mr Paramor indicated that he was a shareholder in Folkestone and its managing director. He also noted that 'Folkestone may be entering into a management agreement (or similar arrangement) with [KCGL]'.[93]
104 When he gave his consent to be appointed as a director, Mr Hodgetts indicated that he was a 'non-material shareholder in Folkestone Ltd as well as occupying a number of positions within the Folkestone Group' and that 'Folkestone may be entering into a management agreement (or similar arrangement) with [KCGL]'.[94]
105 Mr Priest deposed that in March 2013 he was approached by Mr Paramor to act as company secretary for KCGL. Mr Priest deposed that Mr Paramor told him that if he agreed, he was:[95]
to provide secretarial services and undertake a review of various reporting anomalies that had been identified in the 30 June 2012 full year report to shareholders, including assisting as required in reviewing the assets of KCGL and generally to assist in the tidy up [of] the affairs of KCGL.
In all respects my conduct, and my dealings with [BA and Mr Bajada] (including the resolution to issue the notice of default) was in my capacity as an independent director of [KCGL], and for the benefit of KCGL and its shareholders.
At no stage in relation to any of those dealings (or in relation to any other dealing with KCGL, [Mr Bajada and BA]) in my opinion, have I ... acted in any other way than in the best interests of shareholders.
107 Mr Paramor deposed that when he voted in favour of the resolution that KCGL should issue the Notice of Default, he was 'acting as a director of KCGL for the benefit of KCGL and its shareholders'.[98] He deposed that he voted in favour of that resolution as a result of the breaches of the Management Agreement by BA, the findings set out in the Review Report and Mr Bajada's refusal to abide by instructions of the Board.[99]
108 Mr Britton deposed that 'in regard to the issue on behalf of KCGL of the notice of default, I was only ever acting in my capacity as an independent, nonexecutive director of KCGL and in what I believed and still believe to be the best interests of KCGL and its shareholders'.[100] Mr Britton deposed that he voted in favour of the resolution to issue the Notice of Default for a number of reasons including that the Review Report indicated that there were existing and outstanding breaches of the Management Agreement by BA; a number of requests for information from Mr Bajada or BA had not been complied with; Mr Bajada had not complied with directions from the Directors; and Mr Bajada had failed to advise the Board of information concerning one of KCGL's investments.[101]
109 Mr Priest deposed that in April and May 2013 he attended meetings with Mr Hodgetts and representatives of Iffla Wade and Mr Hodgetts. He deposed that he was requested by the directors of KCGL to prepare and issue notices of meetings and agendas, and to prepare minutes of the meetings of the directors of KCGL. Mr Priest deposed that apart from complying with instructions from the directors to issue various notices of meetings, agendas, and to prepare minutes of meetings, he had no role in KCGL's decision to issue the Notice of Default. Mr Priest confirmed that he did not, and does not, have a vote on any resolution or business before KCGL's board.[102] Mr Priest also deposed that Mr Bajada had refused to provide information Mr Priest required to enable him to attend to his role as company secretary.[103]
110 One of the factual issues referred to in the Challenged Counterclaim concerns the non-payment of an invoice issued in April 2013 by BA for its management fees (the April Invoice).
111 Mr Paramor deposed that the Board did not resolve to cease payment of management fees to BA.[104]
112 Mr Britton deposed that he was not aware of any resolution of KCGL's directors to the effect that KCGL was to cease payment of BA's management fees.[105]
114 Mr Hodgetts deposed that the April Invoice had not been paid because he 'had taken the view, based on the updates being received from Sothertons, that [BA] owed KCGL money and paying the invoice would only increase the amount payable'.[108] In addition, he deposed that 'the bankers for KCGL had ceased debits on the relevant accounts'.[109]
115 Mr Hodgetts deposed that on 30 May 2013, the Board resolved to adopt recommendations he had prepared in relation to remuneration for the Directors and the company secretary. Mr Hodgetts abstained from voting on that resolution.[110] He deposed that the Board resolved that reimbursement for expenses he incurred should be approved at a full Board meeting.[111]
116 Mr Hodgetts deposed that the remuneration paid to him pertained to his role as executive director of KCGL, that he was not paid a management fee, nor was the fee paid to him in substitution for any fee paid to BA or to Mr Bajada.[112]
117 Mr Paramor deposed that Mr Hodgetts' evidence in relation to the remuneration of Directors was correct.[113]
118 Mr Britton deposed that Mr Hodgetts' affidavit evidence in relation to the remuneration of Directors was correct.[114] Mr Britton deposed that he was 'not aware of any resolution of directors to the effect that management fees (or officers' salaries) would be paid to [Mr Hodgetts] (or to anyone else) in substitution for fees to [BA].'[115]
119 Mr Priest deposed that at its meeting of 3 May 2013, the Board resolved to adopt recommendations in relation to remuneration which were set out in memoranda prepared by Mr Hodgetts. He confirmed that Mr Hodgetts' evidence in relation to this issue was correct.[116] Mr Priest deposed that 'apart from providing assistance to [Mr Hodgetts] to formulate the remuneration recommendation I, as the company secretary was not involved in the resolution and I did not vote at any directors meeting'.[117]
120 The evidence of the Directors, and the documentary evidence annexed to Mr Hodgetts' affidavit, if accepted at trial, would be capable of establishing a prima facie case that when the Directors resolved to issue the Notice of Default, they were exercising the powers of a director under the Act.[118] That evidence, if accepted at trial, would be capable of supporting a finding that at the time of making the resolution to issue the Notice of Default, the Directors had received the Review Report which identified apparent breaches of the Management Agreement by BA; that before the Notice of Default was issued, the Directors received legal advice from Iffla Wade, and from a Senior Counsel, in relation to the Notice of Default; and that at the time the Directors resolved to issue the Notice of Default, some shareholders in KCGL had indicated their intention to seek the removal of BA as the manager of KCGL.
121 I am satisfied that the evidence to which I have referred would, if accepted, be capable of supporting an inference that it is more likely than not that the Directors acted in the best interests of KCGL when they resolved to issue the Notice of Default. Accordingly, even if the scope of the rule in Said v Butt is limited in the way BA contends, for the purposes of the Summary Judgment Application, the Directors have established a prima facie case that their conduct did not fall outside the scope of that rule, so that no action can lie against them for the torts of procuring a breach of contract or interfering in contractual relations.
122 In so far as Mr Priest is concerned, I am satisfied that the evidence in his affidavit, if accepted at trial, would be sufficient to establish a prima facie case that, as the company secretary, he did not participate in the resolution to issue the Notice of Default. Furthermore, the evidence to which I have referred would, if accepted, be capable of supporting an inference that in his conduct, Mr Priest acted in the best interests of KCGL. Consequently, the Applicants have established a prima facie case that no action could lie against Mr Priest for procuring a breach of contract or interfering in KCGL's contractual relations.
123 The consequence of the Applicants having established that prima facie case is that BA bears an evidentiary onus to demonstrate that a triable issue exists on its case against the Applicants.
124 It is convenient to refer to Mr Bajada's affidavit evidence by reference to the headings used in his affidavit.
125 Mr Bajada's affidavit dealt at length with the history of AET's efforts to remove him and the other directors of KCGL in 2012, and to appoint Mr Hodgetts, Mr Paramor and Mr Britton.
126 Mr Bajada deposed that on 7 May 2012 he met with representatives of IOOF, Mr Hilton and Mr Carter, together with Mr Paramor, who identified himself as the Managing Director of Folkestone. Mr Bajada deposed that during that meeting Mr Hilton told him that IOOF was dissatisfied with BA as the manager of KCGL and wanted to remove BA and the directors of KCGL; that IOOF had engaged Folkestone to undertake an initial review of KCGL's assets; that IOOF sought to appoint Mr Paramor and other members of Folkestone as directors of KCGL; and that Mr Hilton was otherwise concerned with the corporate governance of KCGL.[119] Mr Bajada deposed that Mr Hilton told him that the purpose of these actions was to 'create a liquidity event for IOOF's interests to realise their investment in KCGL'.[120]
127 Mr Bajada also deposed that he met with Mr Paramor on 8 May 2012, at which meeting Mr Paramor advised Mr Bajada that there was 'no future' for BA with KCGL, and discussed terms on which BA could 'transition out of the company'.[121]
128 In addition, annexed to Mr Bajada's affidavit was a copy of an email sent to him by Mr Hilton of IOOF on 16 May 2012, which appears to have been sent in response to an email from Mr Bajada in relation to KCGL's investments. In his email, Mr Hilton said that the 'present offer will not alter our course of action seeking to remove you and the board in favour of Folkestone.'[122]
129 Mr Bajada then deposed that based on his meetings with Mr Hilton, Mr Paramor and Mr Carter, it was his belief that AET or IOOF, and Folkestone were working collectively, and sought to remove the then directors of KCGL; to appoint Folkestone as the manager of KCGL;[123] to 'divest KCGL of its nonmaterial assets and retain only those assets relevant to Folkestone';[124] and to nominate Mr Paramor and others associated with Folkestone as directors and officers of KCGL.[125]
130 Mr Bajada also deposed that 'it is my understanding that Folkestone was interested in obtaining control of certain KCGL assets being those compatible with Folkestone's funds management and property development objectives'.[126]
131 Mr Bajada deposed that he believed that Mr Paramor, Mr Hodgetts and Mr Britton were affiliated with Folkestone; that Folkestone had been 'engaged'[127] by AET or IOOF and 'had a vested interest to align with AET due to its engagement by AET and/or IOOF';[128] that 'due to their affiliation with Folkestone, Mr Paramor, Mr Hodgetts and Mr Britton had reason to act, or could be perceived to have reason to act for and in the best interests of AET and/or IOOF';[129] and that Mr Paramor, Mr Hodgetts and Mr Britton had a conflict of interest, or could be perceived to have a conflict of interest, in conducting their role as officers of KCGL.[130]
132 Mr Bajada's affidavit also addressed the circumstances in which the Notice of Default was issued. He deposed that on 4 March 2013, the Directors had directed that BA fulfil a 'caretaker' role only.[131] In Mr Bajada's view, this direction was not in accordance with the Management Agreement.
133 Mr Bajada deposed that he believed that the Directors formed the view that KCGL could not terminate the Management Agreement unless they alleged that BA had materially breached it, or in the absence of a special resolution from the shareholders of KCGL.[132]
134 Mr Bajada also referred to the appointment of Mr Priest as company secretary of KCGL and the appointment of Sothertons to conduct the Review. He noted that the letter from Sothertons to KCGL in relation to the Review indicated that Mr Priest, together with two other staff members of Sothertons, would prepare the Review, and that Sothertons would be remunerated for it.[133]
135 Mr Bajada deposed that although he was the Managing Director of KCGL, he was not informed that the Directors had approached Mr Priest to consent to appointment as KCGL's company secretary or that the Directors intended to appoint Sothertons to conduct an investigative review.[134]
136 Mr Bajada also deposed that the Directors resolved to issue the Notice of Default without 'any discussions with me regarding evidence being gathered in relation to the management and prior to Sothertons completing its review'.[135]
137 Mr Bajada also deposed that when the Board voted on remuneration for the Directors and company secretary, Mr Bajada had not been given the opportunity to consider the financial and cash flow implications for KCGL of payment of that remuneration, and that Mr Hodgetts, Mr Paramor, Mr Britton and Mr Priest each failed to absent themselves from the room as required by the Act.[136]
138 Mr Bajada deposed that although the Review Report purported to have been prepared for the benefit of the directors of KCGL, he had not been provided with a copy of the report until after seeing Mr Hodgetts' affidavit in these proceedings.[137]
139 Mr Bajada deposed that although the Review Report was a preliminary report, and although it raised legal issues concerning the interpretation of the Management Agreement, BA was not given a copy of the Review Report, nor did the Notice of Default invite BA to comment or provide submissions on, or an explanation for, the alleged breaches of the Management Agreement.[138] Mr Bajada deposed that as a result, he 'interpreted the Notice of Default to be an ultimatum made by Hodgetts, Paramor and Britton, the substance of which was that they had no intention of continuing with the Management Agreement'.[139]
140 Mr Bajada deposed that the April Invoice for BA's management fees had not been paid, and that he had received an email from Mr Hodgetts to the Board advising that payment of the invoice was not authorised.[140] Mr Bajada disputed Mr Hodgetts' evidence that the nonpayment was attributable to a dispute with KCGL's bank.[141]
141 The foundation for the claims made in the Challenged Counterclaim appears largely set out in par [78] of Mr Bajada's affidavit, in which he deposed that he held the following belief:
I verily believe that:
(a) IOOF and AET sought to remove [BA] as the manager of KCGL in preference of persons affiliated with Folkestone;
(b) Given IOOF and AET did not have beneficial interest of any shares in KCGL, question arises as to their motivation for
(c) Hilton had previous association with Paramor;
(d) Hodgetts, Paramor and Britton were affiliated with Folkestone and therefore not independent and were or could be perceived to be acting with conflicting interests to KCGL;
(e) Hodgetts, Paramor, Britton and Priest could not receive any fees for the management of KCGL until the Management Agreement was terminated;
(f) Upon their appointment as directors, Hodgetts, Paramor and Britton sought to terminate the Management Agreement for the benefit of AET, IOOF and their own personal benefit of being appointed as officers and managers of KCGL;
(g) Engaged Priest and Sothertons under the guise of 'for the benefit of the directors of KCGL' without notifying me of the engagement;
(h) In investigating [BA] Sothertons was not independent and was or could be perceived to be acting with conflict interests to KCGL as:
(i) Upon obtaining a limited draft report (potentially flawed due to bias) Hodgetts, Paramor and Britton (by way of voting at a directors meeting) caused KCGL to:
(j) Hodgetts, Paramor, Britton and Priest had no intention of adequately investigating the alleged breaches of the Management Agreement or doing so in the best interests of KCGL as:
142 As I have already observed, BA relied on affidavit evidence to establish that there is a dispute between the parties as to whether Iffla Wade was instructed by KCGL, or by the Directors in their personal capacities, when that firm provided advice to the Directors in respect of the Review Report and the Notice of Default. BA also relied on the concession by counsel for the Applicants that the Board did not resolve at any stage to engage Iffla Wade as solicitors for KCGL.
143 Nothing in Mr Bajada's affidavit suggests that BA has any direct evidence that when the Directors resolved to issue the Notice of Default, the Applicants were acting in their own self-interest, or in the interests of a third party, and not in the best interests of KCGL. BA's case would therefore require the court to draw an inference from such facts as are established at trial. Inferences drawn from facts which are proved 'are just as much part of the evidence as those facts themselves'.[142]
144 However, the facts proved 'must form a reasonable basis for a definite conclusion affirmatively drawn of the truth of which the tribunal of fact may reasonably be satisfied'.[143] In other words, if this action were to proceed to trial then in the absence of direct evidence that the Applicants acted other than in the best interests of KCGL, it would be necessary for BA to adduce evidence which would permit an inference to be drawn which is more than conjecture or surmise.[144] Merely because circumstances might be consistent with a conjecture does not amount to corroboration of it.[145] That is particularly so when, as here, the allegation made by BA that the Directors' conduct was not in good faith and/or in the interests of KCGL is a serious allegation. The Court would not be satisfied that such a conclusion was warranted on the basis of indirect inferences.[146]
145 In order to discharge the evidentiary onus on it for the purposes of the Summary Judgment Application, BA needs to identify some evidence beyond mere conjecture or surmise, which, if accepted at trial, would be capable of supporting an inference that the Directors were not acting in the best interests of KCGL when they resolved to issue the Notice of Default, and that Mr Priest was not acting in the best interests of KCGL when he procured the directors to do so.
146 I have carefully considered the evidence on which BA relies, and the inferences which counsel for BA submits can be drawn from that evidence, in light of the submissions by counsel for BA about BA's intended case against the Applicants. I am not persuaded that BA has discharged its evidentiary onus. In short, that is because in key respects, the 'evidence' on which BA relies constitutes nothing more than speculation or conjecture on Mr Bajada's part that the Applicants were not acting in the interests of KCGL, but rather were acting in their own selfinterest or in the interests of third parties, when the Notice of Default was issued to BA.
147 One plank of BA's case is that the Directors' decision to issue the Notice of Default was made in the interests of AET or IOOF, or Folkestone, to enable them to gain control and influence over the Board, over the management of KCGL, and over its assets.[147] Having regard to the submissions filed on BA's behalf, BA's intended case appears to be that in May 2012, AET and IOOF sought to remove the directors of KCGL, including Mr Bajada, and BA as manager; that when Mr Bajada refused to resign as a Director AET and IOOF sought to secure the appointment of Mr Paramor, Mr Hodgetts and Mr Britton; and that it can therefore be inferred that the conduct of the Directors in issuing the Notice of Default was in the pursuit of the objective of AET and IOOF to remove BA as manager of KCGL, and Mr Bajada as a director, and to appoint Folkestone as the manager of KCGL. I digress to note that given that in May 2012, AET was a majority shareholders in KCGL, there may be a real question as to whether the interests of AET or IOOF in the affairs of KCGL were relevantly identical to the interests of KCGL, or those of its shareholders. However, it is not necessary to resolve that question for present purposes.
148 BA has clearly identified evidence which, if accepted at trial, could support a finding that in or about May 2012, officers of IOOF wanted to remove BA, Mr Bajada and the other directors of KCGL (see [126] [128] above). BA has also pointed to evidence which, if accepted at trial, could support a finding that AET and IOOF contemplated that Folkestone might be appointed as the manager of KCGL (see [128] above). And there is also evidence that when they were appointed as directors, Mr Paramor and Mr Hodgetts considered it possible that Folkestone may be appointed the manager of KCGL (and hence each of them disclosed that interest in their consent to appointment as a director) (see [103] [104] above). However, I am not persuaded that that evidence, whether taken individually or collectively, is capable of supporting an inference that when the Directors resolved to issue the Notice of Default, they did so in the interests of AET or IOOF, or Folkestone, in the way asserted by BA. I have reached that view for the following reasons.
149 First, there is nothing in the evidence outlined in Mr Bajada's affidavit which connects the Directors' resolution to issue the Notice of Default to the objective of AET or IOOF, approximately one year earlier, to replace the directors of KCGL. I digress to observe that there is nothing untoward about the fact that AET or IOOF sought to replace the directors of KCGL. I accept the submission by counsel for the Applicants that if either AET or IOOF, as a majority shareholder in KCGL, was 'dissatisfied with the management of KCGL they were entitled (subject to compliance with the relevant agreements, the company's constitution and the law) to do something about it; including replacing the directors of KCGL.'[148]
150 Secondly, the underlying assumption in BA's case appears to be that the Directors were acting at the behest of AET or IOOF to secure the termination of the Management Agreement. However, BA has not pointed to any evidence whatsoever which is capable of supporting an inference of that kind. There is no evidence to suggest that Mr Paramor, Mr Hodgetts, or Mr Britton was an employee of AET or IOOF, or subject to their direction for any reason. The fact that Mr Paramor, Mr Hodgetts and Mr Britton were nominated for appointment by AET, which represented the majority of shareholders in KCGL, does not of itself support the inference that the Directors thereafter acted in the interests of AET or its parent company IOOF, rather than in the best interests of KCGL and its shareholders (to the extent that those interests were not coextensive, having regard to AET's shareholding in KCGL). It could hardly be surprising that in nominating a director for appointment, AET and IOOF would wish to be satisfied that the nominee had the necessary skill and experience to carry out the role of a director, and so would nominate a person they knew to have experience in corporate management.
151 Thirdly, BA has not identified any evidence which could support the inference that the Directors' resolution to issue of the Notice of Default was carried out for the purpose of achieving IOOF's desire to enable shareholders to realise their investment in KCGL. I am unable to see any connection at all between the issue of the Notice of Default and the realisation of shareholders' investments.
152 Fourthly, it appears to be BA's case that it was intended by AET and IOOF that Folkestone would act in a managerial role in KCGL. Even if that was what was contemplated or intended by AET and IOOF in May 2012, there was no evidence that Folkestone was appointed at any time after the Notice of Default issued, and no evidence capable of supporting an inference that the Directors' intention when they resolved to issue the Notice of Default was to enable Folkestone to be appointed as manager. The fact that Mr Paramor is a director of Folkestone, and that Mr Hodgetts is an officer of other companies in the Folkestone group, does not advance the position. Nor could the fact that Mr Britton had a longstanding association with Mr Sweeney, a director of Folkestone (having worked with him in other companies for many years), support an inference that in resolving to issue the Notice of Default, Mr Britton was acting in the best interests of Folkestone.
153 Finally, having regard to the content of his affidavit, Mr Bajada's professed beliefs as to the intention of AET or IOOF, or Folkestone, and as to the intention of the Directors when they resolved to issue the Notice of Default, appears to constitute no more than conjecture on his part. Such conjecture is not capable of supporting an inference that when they resolved to issue the Notice of Default, the Directors were not acting in the best interests of KCGL, but rather were acting in the interests of AET or IOOF, or Folkestone.
154 Another plank of BA's case is that the Directors' resolution to issue the Notice of Default was made in their own selfinterest, so that they could continue to act as directors and to receive remuneration.[149] Counsel for BA submitted that the fact that Mr Paramor, Mr Hodgetts and Mr Britton accepted nominations for appointment as a director of KCGL 'of itself was seeking and obtaining the benefit of being a director'[150] and that the Directors were therefore acting in their own selfinterest because they stood to be remunerated in that role. BA also contends that the Directors' resolution in relation to the payment of remuneration for the officers of KCGL supports the inference that the Directors were acting in their own selfinterest.
155 I do not see how the fact that the Directors received remuneration, and in Mr Hodgetts' case, the fact that he was reimbursed for expenses, could found an inference that when the Directors resolved to issue the Notice of Default, they were not acting in the best interests of KCGL but rather were acting in their own self-interest. The payment of directors' fees and reimbursement of expenses is contemplated in the Act[151] and such payments were permitted under the KCGL's Constitution.[152] There is no evidence to suggest any link between the Directors' resolution to issue the Notice of Default and their receipt of remuneration (which was the subject of the resolution of the Board made on 3 May 2014).
156 The final plank of BA's case appears to be that the Directors' conduct since their appointment would support an inference that they had 'a preexisting motivation and objective to terminate the Management Agreement to facilitate the removal of Bajada and [BA's] influence over KCGL'.[153] Counsel for BA submitted that a number of 'facts' could be established to support a variety of 'inferences' which together would support the inference that the Directors' resolution to issue the Notice of Default was not made in the best interests of KCGL. The 'facts' in question, if established, would not support such an inference. A couple of examples will suffice to illustrate the point.
157 Counsel for BA submitted that the Directors established the Review, restricted BA's authority to make unilateral decisions, and resolved to issue the Notice of Default on the basis of the findings of the Review, 'without any substantive discussion or consultation' with BA, and that the directors had instead acted 'covertly' and to the exclusion of BA and Mr Bajada. In circumstances where (as the minutes of the Board meetings reveal) the Directors were, from the outset, concerned about BA's financial management of KCGL, and where (in view of the recommendations in the Review Report) they had information to suggest that BA may have breached the Management Agreement, in that it may have overpaid itself in a significant amount, or charged KCGL for expenses which BA should have borne under the Management Agreement, I do not see how the alleged conduct of the Directors would be capable of supporting an inference that when the Directors resolved to issue the Notice of Default they were not acting in the best interests of KCGL.
158 Counsel for BA submitted that the concession by counsel for the Applicants that the Board had not made a resolution to appoint Iffla Wade as the solicitors for KCGL, supported an inference that Iffla Wade had been engaged by the Directors personally, rather than by KCGL. BA submitted that the circumstances and manner of Iffla Wade's appointment would permit the conclusion that the manner in which the Directors engaged and instructed Iffla Wade was 'covert', and that this was evidence that the Directors were not acting in the best interests of KCGL and its shareholders. I do not accept those submissions. The fact that the Directors did not vote on a resolution appointing Iffla Wade as the solicitors for KCGL (nor have they since resolved to ratify that appointment) is not evidence that the Directors were not acting in the best interests of KCGL when they resolved to issue the Notice of Default, nor in my view is it capable of supporting an inference of that nature.
159 Counsel for BA also contended that the evidence would establish that the Directors had resolved to suspend payments to BA. The minutes of the meeting of the Board on 3 May 2013 do not record such a resolution. However, there was no dispute that the April Invoice had not been paid. I do not see any basis on which it could be said that the fact that the April Invoice was not paid could support an inference that the Directors' resolution to issue the Notice of Default was not made in the interests of KCGL.
160 The underlying, but unstated, theme of BA's submissions, is that the Directors did not act in a way compatible with BA's interests in continuing to act as the manager of KCGL. But the Directors were not obliged to act in BA's interests. And even if the Directors acted contrary to BA's interests, that does not warrant an inference that the Directors were not acting in KCGL's interests when they resolved to issue the Notice of Default. KCGL's interests and BA's interests in this respect cannot be regarded as identical.
161 In the Challenged Counterclaim, BA alleges that Mr Priest also induced KCGL to breach the Management Agreement by procuring KCGL to resolve to issue the Notice of Default. In so far as BA contends that Mr Priest was directly involved in the resolution to issue the Notice of Default, that part of its case has no prospect of success. The minutes of the Board meeting on 3 May 2013 indicate that the resolution to issue the Notice of Default was made by the Directors. Mr Priest deposed that he had no role in KCGL's decision to issue the notice of default to BA, or in the resolution of the Board on 3 May 2013,[154] and that as the company secretary, he did not then (and still does not) have a vote on any resolution of the Board.[155] (This is hardly surprising given that a company secretary will not ordinarily have voting rights within a company.[156]) Counsel for BA did not point to any evidence to the contrary.
162 However, in the Challenged Counterclaim, BA also alleges that Mr Priest induced KCGL to breach the Management Agreement by 'conducting [the Review]' and by 'otherwise assisting [the Directors] to induce [KCGL] to terminate the [Management Agreement]'[157] by issuing the Notice of Default. Counsel for BA submitted that the evidence available to BA, which was identified in the affidavits, would support two alternative inferences which in turn would warrant such a finding. First, counsel for BA submitted that the evidence would support an inference that Mr Priest, through Sothertons, 'provided advice for the benefit of [the Directors] and consistent with their motivations to remove [BA]'.[158] Counsel for BA pointed to the evidence that Mr Priest had had a 30year professional association with Mr Paramor.[159] Secondly, counsel for BA submitted that the evidence would support an inference that Mr Priest and Sothertons, 'had a personal interest in [BA] being removed as manager in order to obtain accounting, secretarial fees and other professional fees'[160] and that '[Mr] Priest and Sothertons stood to benefit from an adverse investigation by Sothertons against [BA]'.[161]
163 These submissions appeared to imply that an inference could be drawn from the circumstances that: Mr Priest (or Sothertons) made adverse findings against BA in the Review Report, which were not supported by the evidence which was examined in the Review Report, or which did not reflect the genuine opinion of Mr Priest (or Sothertons); and that Mr Priest (or Sothertons) did so in order to induce the directors to resolve to issue the Notice of Default, and thereby to facilitate the removal of BA as manager of KCGL, in furtherance of a desire by the Directors to remove BA, or so that Mr Priest or Sothertons could obtain remuneration for providing secretarial services to KCGL.
164 BA did not identify any evidence whatsoever to support an inference of that kind. BA did not point to any evidence capable of supporting an inference that the recommendations in the Review Report were not genuinely held, or were not based on the evidence Sothertons had before it in the Review. The fact that Mr Priest and Mr Paramor had worked with each other in a professional context for many years is clearly not capable of supporting such an inference. Furthermore, the dispute between the parties in relation to the findings of the Review appears to turn on the construction of the terms of the Management Agreement. In that respect, I note that the Review Report recommended that KCGL obtain legal advice in relation to the construction of the relevant terms of the Management Agreement. That recommendation is inconsistent with an inference of the kind BA suggests could be drawn.
165 BA also did not identify any evidence whatsoever which would be capable of supporting an inference that Sothertons stood to gain a commercial advantage in providing a 'negative finding' against BA, or that Mr Priest had any personal interest in BA being removed as manager in order to obtain accounting fees, secretarial fees or other professional fees. BA did not identify any evidence that the remuneration paid to Sothertons in respect of Mr Priest's company secretary services would otherwise have been paid to BA, or that payment of that remuneration was in some way dependent upon the Directors' resolution to issue the Notice of Default. On the contrary, the Board Minutes suggest that the Directors' resolution to pay remuneration to Sothertons for Mr Priest's company secretary role was made on 14 March 2013, some two months prior to the Directors' resolution to issue the Notice of Default. And there was no evidence to suggest that after BA ceased to be the manager of KCGL that Mr Priest or Sothertons had been engaged to provide the services which BA previously performed.
166 In my view, BA has not identified any evidence which would be capable of supporting an inference that Mr Priest engaged in conduct which procured the breach by KCGL of the Management Agreement (by the Directors' resolution to issue the Notice of Default) or that his conduct was not undertaken in the best interests of KCGL.
167 For the reasons outlined above, I am of the view that BA has not discharged its evidentiary onus of demonstrating that a triable issue exists that the Applicants' conduct fell outside the scope of the rule in Said v Butt. I am satisfied that the Applicants have established a good defence on the merits, so that summary judgment should be granted in respect of the Challenged Counterclaim.
168 The parties should confer in respect of a minute of orders to give effect to these reasons.
Appendix 1: Summary of the Challenged Counterclaim
Based on paragraphs 57 to 65 it can be inferred that Hodgetts, Paramor and Britton sought to terminate the Management Agreement in the best interests of:
66.1: Paramor and Britton to allow them to obtain directors' fees from [KCGL];
66.2: Hodgetts to obtain remuneration for directors' fees and management services at the exclusion of [Mr Bajada] and [BA]; and
66.3: Folkestone and IOOF to gain control and influence over the board, management and assets of [KCGL].
Based on paragraphs 55 and 62 to 65, it can be inferred that in accepting his position as company secretary, Priest acted in the best interests of:
67.1: Paramor and Folkestone in taking control of the board and the management of [KCGL];
67.2: Sothertons in obtaining remuneration for [the Review] and ongoing fees from [KCGL] for the provision of accountancy, taxation and compliance services; and
67.3: Priest to obtain remuneration for company secretary fees from [KCGL] at the exclusion of [BA].
The conduct of Hodgetts, Britton, Paramor and Priest outlined in paragraphs 62 to 67 above was:
68.1: not in good faith or for a proper purpose or in the best interests of [KCGL];
68.2: in breach of their duties as officers of [KCGL] as outlined in paragraph 56 above;
68.3: outside the scope of their authority as officers of [KCGL]; and
68.4: acts in their personal capacities and for their personal benefit.
Through their positions as officers of [KCGL] and in their personal capacity, Hodgetts, Britton, Paramor and Priest induced [KCGL] to wrongfully repudiate the Management Agreement by procuring [KCGL] to resolve to issue the Notice of Default to [BA].
Particulars
BA relies upon the conduct and intentions of:
as outlined in paragraphs [57] [68] above. [BA] will provide further particulars following discovery and inspection.
In the premises, in causing [KCGL] to wrongfully repudiate the Management Agreement, Hodgetts, Britton, Paramor and Priest acted:
70.1: knowingly and intentionally;
70.2: wrongfully and without justification;
70.3: for the purpose of breaking or interfering with the performance by [BA] and/or [KCGL] of the Management Agreement and/or procuring [KCGL] to breach the Management Agreement;
70.4: with the knowledge that their actions would break or interfere with the performance of the Management Agreement and/or cause [KCGL] to breach the Management Agreement; and
70.5: for the purpose of obtaining their own commercial benefit at the expense, loss and damage of [BA] and [KCGL].
Particulars: BA will provide particulars following discovery and inspection.
As a result of the matters outlined in paragraphs 68, 69 and 70 above, [BA] suffered loss and damage and claims against Hodgetts, Britton, Paramor and Priest damages for economic loss.
In the premises, [BA] is also entitled to claim aggravated damages for the knowing and intentional contractual interference of [KCGL and BA] by Hodgetts, Britton, Paramor and Priest, in which they each:
72.1: had knowledge that their actions were without justification;
72.2: had knowledge that their actions would cause loss, damage and harm to [BA]; and
72.3: caused the wrongful interference for personal gain.
CITATION : KNIGHTS CAPITAL GROUP LTD -v- BAJADA AND ASSOCIATES PTY LTD [2016] WASC 69 (S)
Practice and procedure - Costs - Indemnity costs - Successful application for summary judgment by defendants to counterclaim - Whether counterclaim was hopeless - Whether plaintiff by counterclaim's conduct warranted disapprobation of court - Turns on own facts
Indemnity costs order made as to costs of hearing on 18 December 2015
1 PRITCHARD J: Earlier this year, I delivered reasons for judgment[162] in which I concluded that the application by the second to fifth defendants by counterclaim (the Applicants) for summary judgment on the counterclaim pursuant to O 16 r 1 of the Rules of the Supreme Court 1971 (WA) (the Summary Judgment Application) should be granted, on the basis that the Applicants had a good defence on the merits. These reasons should be read in conjunction with those reasons for decision. The same abbreviations have been used.
2 Following the delivery of my reasons for granting the Summary Judgment Application, I ordered that there be judgment for the Applicants on the counterclaim and that BA pay the Applicants' costs of the proceedings. In addition, as the Applicants had foreshadowed their intention to make an application for indemnity or other special costs orders, I made orders by consent that any such application be determined on the papers.
3 The Applicants subsequently sought an order for indemnity costs (the Costs Application), in the following terms (the Proposed Costs Orders):
1.1 the [Summary Judgment Application] including all reserved costs and the costs of this application;
1.2 the costs thrown away by reason of [BA's] amendment, reamendment and further re-amendment of its defence and counterclaim,
except insofar as they are of an unreasonable amount or have been unreasonably incurred, so that subject to the above exceptions the [Applicants] are completely indemnified by [BA] for their costs.
5 For the reasons set out below, I am not persuaded that an order for indemnity costs should be made in respect of the Applicants' costs of the Summary Judgment Application as a whole. However, I am satisfied that an order for indemnity costs should be made in respect of the Applicants' costs of the hearing on 18 December 2014.
6 There was no dispute in relation to the following background facts which the Applicants submitted were relevant to the Costs Application.[163]
7 By a writ of summons issued on 24 June 2014, with statement of claim indorsed, KCGL sued BA and Mr Bajada for damages for breach of the Management Agreement, or compensation pursuant to the Corporations Act 2001 (Cth), and seeking to recover monies it alleged were overpaid to BA. By an amendment made on 17 September 2014 the amount of damages claimed was reduced.
8 On 4 August 2014, BA and Mr Bajada filed a defence and BA filed a counterclaim. As against KCGL, the counterclaim was for $1,864,331.61 in damages (which was said to be the amount owing pursuant to the Management Agreement between KCGL and BA) and for special damages in the sum of $6,877,993.92 (in respect of profits allegedly lost as a consequence of KCGL's alleged repudiation of the Management Agreement). The alleged loss of profits was also pleaded as against the Applicants, on the basis that they caused KCGL to repudiate the Management Agreement. At that stage, the defence and counterclaim did not plead any lack of good faith or any exception to the rule in Said v Butt.[164]
9 By letter dated 29 August 2014 and by means of conferral, the Applicants explained why, in their view, the counterclaim against them did not disclose a cause of action and sought BA's agreement to dismiss that part of the counterclaim. The same deficiencies in the counterclaim were raised by the Applicants in a strategic conference held on 5 September 2014, in the course of which the Applicants indicated their intention to make the Summary Judgment Application. At that point, BA indicated its intention to amend the counterclaim.
10 An amended defence and counterclaim, including amendments to the parts of the counterclaim relating to the Applicants, was filed on 25 September 2014.[165]
11 On 10 October 2014, the Applicants filed the Summary Judgment Application which included, in the alternative, an application to strike out part of the amended counterclaim. Each of the Applicants swore an affidavit in support of that application.
12 On 22 October 2014, the Applicants filed their defence to the amended counterclaim.
13 On 19 November 2014, Mr Bajada swore an affidavit in opposition to the Summary Judgment Application.
14 On 25 November 2014, BA filed an amended defence and counterclaim which included substantial amendments to the parts of the counterclaim relating to the Applicants.
15 On 27 November 2014, the Applicants filed their submissions in support of the Summary Judgment Application.
16 On 9 December 2014, BA filed its submissions in opposition to the Summary Judgment Application.
17 On 15 December 2014, BA filed a further reamended defence and counterclaim which included further amendments to the parts of the counterclaim relating to the Applicants.
18 The Summary Judgment Application was heard on 18 December 2014. At the commencement of his submissions, counsel for BA conceded that the pleading of the counterclaim was deficient and sought leave to replead the counterclaim. I regarded that concession as properly made and expressed the view that the counterclaim did not adequately plead BA's case and that BA's submissions on the Summary Judgment Application did not clearly identify its case against the Applicants.
19 In view of the concession by counsel for BA, the balance of the hearing on 18 December 2014 focused on whether BA had identified sufficient evidence to demonstrate that a triable issue existed in relation to its case against the Applicants so as to justify the dismissal of the Summary Judgment Application and the grant of leave to replead the counterclaim.
20 At the conclusion of the hearing on 18 December 2014, I made orders giving BA the opportunity to provide a written summary of those parts of the evidence it had filed which it contended could support an inference of a lack of good faith by the Applicants, (so as to demonstrate the existence of a triable issue in relation to the existence of an exception to the rule in Said v Butt) and orders permitting the Applicants the opportunity to file a response to that summary. I also made orders vacating a mediation conference which was then listed for a date about two months after the hearing.
21 On 13 January 2015, BA filed its summary of evidence. The Applicants filed their response on 21 January 2015. BA then filed an amendment to its summary of evidence on 23 January 2015.
22 At BA's request, the matter was re-listed before me on 25 February 2015, at which point I made orders for the parties to file further written submissions in respect of the Summary Judgment Application.
23 I subsequently published my reasons for concluding that summary judgment should be granted to the Applicants on the counterclaim in so far as it pertained to them.
Principles in relation to indemnity costs orders
24 The principles in relation to orders for costs on an indemnity basis are well-established. They were set out by the Court of Appeal in Swansdale Pty Ltd v Whitcrest Pty Ltd.[166] After pointing out that an order for indemnity costs will only be made in exceptional circumstances,[167] the Court summarised the relevant principles as follows (case citations omitted):[168]
Courts in both the United Kingdom and Australia have long accepted that solicitor and client costs can properly be awarded in appropriate cases, where "there is some special or unusual feature in the case to justify the court exercising its discretion in that way". (emphasis added)
It is sufficient, in my opinion, to enliven the discretion to award such costs that, for whatever reason, a party persists in what should on proper consideration be seen to be a hopeless case.
The categories in which the discretion may be exercised are not closed.
On the one hand, a party should not be discouraged, by the prospect of an unusual costs order, from persisting in an action where its success is not certain. Uncertainty is inherent in many areas of law, and the law changes with changing circumstances. It is inappropriate that a case be too readily characterised as "hopeless" so as to justify an award of indemnity costs to the successful party. However, where a party has by its conduct unnecessarily increased the cost of litigation, it is appropriate that the party so acting should bear that increased cost. Persisting in a case which can only be characterised as "hopeless" is an example of the type of conduct which may lead the court to a view that the party whose conduct gave rise to the costs should bear them in full.
However, counsel for the plaintiffs was unable to identify any costs so incurred that would not be covered by an order for party and party costs. An order for indemnity costs on this ground is therefore not warranted.
A solicitor should not, in my view, resort to an application for an indemnity costs order merely to secure the recovery which could be achieved by a properly formulated special costs order, unless the unsuccessful party's conduct is genuinely to be impugned by the successful party.
25 Having regard to the submissions made by the Applicants in this case (which I discuss below), the following additional principles should also be mentioned.
26 An order for costs on an indemnity basis may be made on the basis that an action was 'hopeless' in the sense that the action was 'commenced or continued in circumstances where the plaintiff, properly advised, should have known that the action had no prospect of success'.[169] An action which appears to have been commenced or continued in circumstances where the applicant, properly advised, should have known that he or she had no chance of success, may be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of known facts or clearly established law.[170] In assessing whether a party engaged in improper or unreasonable conduct, attention needs to be focused on what the party knew, or ought reasonably to have known, in the circumstances.[171]
27 Finally, it must also be borne in mind that simply because a case is weak or marginal, or unlikely to succeed, does not make it a 'hopeless' case which merits the sanction of an indemnity costs order.[172]
The parties' submissions The Applicants' submissions
28 The Applicants submitted that the Proposed Costs Orders should be made as a sign of the Court's disapproval of BA's conduct in bringing and maintaining the counterclaim against the Applicants. The Costs Application effectively rested on three planks.
29 First, the Applicants submitted that BA acted unreasonably in prosecuting the counterclaim generally, and that that conduct resulted in a considerable waste of time for the Court and for the Applicants and increased the Applicants' costs.[173] This plank of the argument focused on the inadequacy of the way in which the counterclaim was pleaded.
30 The Applicants' submissions attached a copy of a letter written by their solicitors to BA's solicitors, after the defence and counterclaim was filed, in which they explained why, in their view, the counterclaim (as it stood at that point) was deficient and referred to the rule in Said v Butt and other relevant authorities.
31 The Applicants noted that the counterclaim was amended three times: on 25 September 2014, before the Summary Judgment Application was brought, on 25 November 2014, after the Summary Application was filed, and again on 15 December 2014, shortly before the hearing of the Summary Judgment Application and after the Applicants had filed their submissions.
32 The Applicants also relied on the fact that very early in his submissions at the hearing of the Summary Judgment Application, counsel for BA conceded that BA's pleadings were deficient. At the very least, that was because even after three amendments, the counterclaim still did not plead all of the material facts on which BA wished to rely in support of its claim that the Applicants had induced KCGL wrongfully to repudiate the Management Agreement and thereby interfered with KCGL's performance of the Management Agreement, so that they were liable for the torts of procuring a breach of contract or interfering with KCGL's contractual relations. In order to establish that the Applicants were personally liable for those torts, BA had to establish that there was an exception to the rule in Said v Butt[174] and that the Applicants' conduct fell within that exception. At the hearing on 18 December 2014, it became clear that BA's intended case against the Applicants on the counterclaim was that the Applicants' conduct was not in good faith, or for a proper purpose, or in the best interests of KCGL, and stood outside the scope of their authority as officers of KCGL, so that it could be characterised as conduct in their personal capacity. It also became clear, however, that the facts on which BA wished to rely to establish that case were simply not pleaded in the counterclaim. The hearing of the Summary Judgment Application was thus adjourned to enable BA to put further submissions before the Court which identified the evidence upon which BA wished to rely. In due course it filed a lengthy summary of that evidence.
33 The Applicants submitted that BA nevertheless failed to identify a sufficient factual basis for the exception to the rule in Said v Butt on which it relied and observed that it is unusual for a case to be dismissed summarily by reason of its factual inadequacy. They point to those circumstances as an unusual feature of this case which warrants an order for costs on an indemnity basis.
34 Secondly, the Applicants submitted that BA's case, as pleaded, was never arguable and that, properly advised, BA should have been aware that it had no reasonable chance of success. The Applicants submitted that BA should always have known of the deficiencies in its case, and that the result of the Summary Judgment Application suggests that either those advising BA did not properly analyse the claim or BA proceeded knowing the likely result.
35 Thirdly, the Applicants submitted that because the counterclaim as against the Applicants exposed them to the prospect of personal liability where there was no apparent benefit to BA in taking that step, it was open to the Court to infer, in all the circumstances, that BA's purpose in joining the Applicants was 'to apply pressure to the directors of the plaintiff, in their personal capacity'.[175]
36 BA submitted that the Applicants had not established that indemnity costs were warranted in this case. It submitted that the fact that it did not ultimately succeed in the counterclaim was not a basis for the exercise of the discretion to make an indemnity costs order. BA submitted that this case lacked the special or unusual features that would warrant the making of such an order.
37 BA also submitted that it did not prolong the proceedings by making unmeritorious contentions and could not be said to have acted unreasonably in commencing or continuing the counterclaim. In this respect, BA submitted that by the time of the hearing on 18 December 2014, the counterclaim had been amended to allege that the Applicants were not acting in good faith, and that their conduct fell within an exception to the rule in Said v Butt. BA noted that I observed in my reasons for granting the Summary Judgment Application that I would not have granted summary judgment on the basis that it was not open to BA to argue that there was an exception to the rule in Said v Butt, and that I would have left that question to trial.
38 Finally, BA submitted that the Applicants carried a heavy burden of proof in relation to the allegation that BA joined the Applicants to the counterclaim to apply pressure to the directors of KCGL, and that the Applicants had not discharged that burden of proof as there was no evidence to support the allegation.
Why an order for indemnity costs should not be made with respect to the Applicants' costs on the counterclaim generally
39 I am not persuaded that an order for indemnity costs should be made with respect to the Applicants' costs on the counterclaim generally. I have reached that view for three reasons.
40 First, as I explained in my reasons for granting the Summary Judgment Application, I was not persuaded that the claim BA advanced against the Applicants was beyond argument, having regard to the state of the authorities. This was not a case where BA advanced a claim which was manifestly not arguable.
41 Secondly, one of the key bases on which I concluded that summary judgment should be granted was that BA had not discharged its evidentiary onus of demonstrating that a triable issue existed on its case against the Applicants. That was because I concluded that the evidence relied upon by BA could not, if accepted at trial, support an inference that the Applicants were not acting in good faith and in the interests of KCGL when they resolved to issue the Notice of Default to BA, or that they were acting in their own self-interest, rather than in the interests of KCGL, when they resolved to issue the Notice of Default, or that they never intended to be bound by the Management Agreement, and so issued the Notice of Default other than in the best interests of KCGL.
42 This was one of those rare cases where detailed argument demonstrated that summary judgment should be granted.[176] But that does not, of itself, constitute a special or unusual feature about the case which is sufficient to warrant the making of an indemnity costs order. The position is quite to the contrary. I concluded that summary judgment should be granted only after careful consideration of the evidence on which BA relied to demonstrate that there existed a triable issue, and with the assistance of detailed submissions by counsel for the parties. That serves to confirm, in my view, that it cannot be said that the case was so obviously hopeless that it should not have been advanced or maintained.
43 The most that can be said is that it should have been obvious to BA that its case against the Applicants was weak, and that its prospects of success were therefore poor, having regard to the state of the law and to the evidence (limited as it was) on which BA relied. But as I have already pointed out, the fact that a case is weak or unlikely to succeed is not enough to merit the sanction of an indemnity costs order. For the same reason, BA's conduct in prosecuting the counterclaim against the Applicants at all cannot be regarded as so unreasonable as to warrant an indemnity costs order being made as a sign of the Court's disapproval of that course.
44 Thirdly, I am unable to accept the Applicants' submission that the Court can infer that BA's purpose in joining the Applicants was to apply pressure to the directors of KCGL. I understand that submission to mean effectively that BA brought the counterclaim against the Applicants with a view to placing pressure on the Applicants, in their capacity as the directors of KCGL, to settle the counterclaim. The Applicants relied on three aspects of the circumstances as the basis for that inference.[177] The Applicants contended that there was some evidence before the Court that KCGL had the capacity to pay BA's claim, if BA was wholly successful, so that BA could have recovered its claimed loss and damage as against KCGL, without taking action against the Applicants. Further, they pointed to the fact that the counterclaim as against the Applicants could not succeed unless BA's claim against KCGL (and specifically the allegation that KCGL repudiated the Management Agreement, thereby causing loss and damage to BA) was successful. Finally, they pointed to the fact that the claim against the Applicants involved the proof of further issues beyond those involved in BA's claim against KCGL.
45 I accept the submission by counsel for BA that the Applicants bear a heavy burden of proof in making a submission of this kind. I am not persuaded that the Applicants have established an adequate evidentiary basis to draw such a serious inference. There is no reason why a litigant may not proceed against more than one party to recover for the same loss and damage simply because one of those parties may have the capacity to pay the entirety of an award of damages in respect of the loss and damage.
46 There is one further matter which should be mentioned. In so far as the Costs Application sought indemnity costs in respect of the Applicants' costs thrown away by reason of the fact that the counterclaim was amended three times prior to the hearing of the Summary Judgment Application, that part of the application held some initial attraction. However, in the end I have concluded that such an order is not warranted. It is far from apparent that the Applicants actually incurred any costs which were thrown away by the amendments. That is because the amendments to the counterclaim on each occasion sought to develop the same claim as against the Applicants and the Applicants' response to the counterclaim appears to have been the same throughout (having regard to the submissions it filed in respect of the Summary Judgment Application). The costs orders I have already made should permit the Applicants to recover their costs, at the scale rate, of preparing their defence to counterclaim and their costs of preparing for the Summary Judgment Application, in which they advanced the same fundamental point (namely that the rule in Said v Butt applied and there was no exception to the rule).
47 However, in so far as the Applicants incurred costs at the hearing of the Summary Judgment Application on 18 December 2014, I am persuaded that they should be wholly indemnified in respect of those costs. That is because it was apparent (as I observed at the time) that the amended counterclaim, as it then stood, was manifestly inadequate to plead the case that BA advanced, which rendered the hearing, in large part (although perhaps not entirely), a waste of the Court's time and of the Applicants' time and money. In my view, counsel for BA should have had formed the view prior to the hearing, having reflected on the Applicants' submissions and on the state of its pleading, that the amended counterclaim was still deficient and required further amendment (at least to plead the material facts upon which BA sought to rely). That being so, the appropriate course was to confer with the Applicants' solicitors and to seek an adjournment of the hearing to permit that amendment to be made. That would have ensured that the hearing of the Summary Judgment Application could, in due course, have proceeded on the basis of a pleading which represented the case which BA actually advanced. In my view, it was unreasonable for BA not to have taken that course and it is appropriate to make an order for indemnity costs in respect of the hearing on 18 December 2014 to signal the Court's disapproval of that conduct.
[1] Further Re-Amended Defence and Counterclaim, dated 15 December 2014.
[2] Affidavit of Grant Bartley Hodgetts sworn 7 October 2014 in support of Application by the Second to Fifth Defendants to Counterclaim for Summary Judgment, Alternatively to Strike Out Parts of Counterclaim (Hodgetts Affidavit), Annexure GBH12.
[11] Hodgetts Affidavit, Annexure GBH23.
[12] Hodgetts Affidavit, Annexure GBH23.
[13] Hodgetts Affidavit, Annexure GBH23.
[14] Hodgetts Affidavit, Annexure GBH22.
[15] Hodgetts Affidavit, Annexure GBH22.
[16] Hodgetts Affidavit, Annexure GBH25.
[17] Hodgetts Affidavit, Annexure GBH30.
[18] Hodgetts Affidavit, Annexure GBH29.
[19] Hodgetts Affidavit, Annexure GBH31.
[20] Amended Defence and Counterclaim, dated 2 October 2014.
[21] Re-Amended Defence and Counterclaim, dated 25 November 2014; Further Re-Amended Defence and Counterclaim, dated 15 December 2014.
[22] That is, Re-Amended Defence and Counterclaim, dated 25 November 2014: see, eg, Outline of Submissions by Second to Fifth Defendants to Counterclaim in support of Application for Summary Judgment, Alternatively to Strike Out Parts of the Counterclaim, dated 27 November 2014 (Applicants' Submissions) [17] and Plaintiff to Counterclaim's Outline of Submissions in Reply to the Second to Fifth Defendants to Counterclaim Submissions, dated 9 December 2014 (Plaintiff to Counterclaim's Submissions) [2].
[24] Plaintiff to Counterclaim's Summary of Evidence, dated 13 January 2014 [5].
[25] Plaintiff to Counterclaim's Summary of Evidence, dated 13 January 2014 [6].
[28] Kimberley Downs Pty Ltd v The State of Western Australia (Unreported, WASC, Library No 6414, 25 August 1986) 6 7 (Staples M).
[29] Cf WA Country Builders Pty Ltd v Premium Coastal Property Pty Ltd [2012] WASC 236 [11] (Sanderson M).
[30] Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552 [57] (Gaudron, McHugh, Gummow & Hayne JJ); Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27; (2006) 226 CLR 256 [46] (Gleeson CJ, Gummow, Hayne & Crennan JJ); Spencer v Commonwealth of Australia [2010] HCA 28; (2010) 241 CLR 118 [24] (French CJ & Gummow J); Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87, 99; Webster v Lampard [1993] HCA 57; (1993) 177 CLR 598, 602 603 (Mason CJ, Deane & Dawson JJ).
[31] Webster v Lampard [1993] HCA 57; (1993) 177 CLR 598, 602.
[32] General Steel Industries Inc v Commissioner for Railways (NSW) (1964)112 CLR 125, 130 (Barwick CJ).
[33] Anderson v Effexseven (1999) 10 ANZ Ins Cas 61 424, 74,757 (Parker J, Owen J agreeing).
[34] See Moscow Narodny Bank Ltd v Mosbert Finance (Aust) Pty Ltd [1976] WAR 109, 110 (Brinsden J) in relation to applications under O 14 r 1 RSC; see also Bankwest (a division of CBA) v Mann [2015] WASC 187 [46]; HSBC Bank Australia Ltd v Mavaddat [2015] WASC 153 [26]; Gel Custodians Pty Ltd v Dewar [2014] WASC 177 [25]; Hee v Nyoni [2014] WASC 44 [25]; Wright v Wright [2002] WASC 30 [19].
[35] Moscow Narodny Bank Ltd v Mosbert Finance (Aust) Pty Ltd [1976] WAR 109, 110 (Brinsden J), citing Wallingford v Mutual Society (1880) 5 App Cas 685, 704 (Lord Blackburn).
[36] Cordinup Resorts Pty Ltd v Terana Holdings Pty Ltd (1997) 143 FLR 18, 24.
[37] Plaintiff to Counterclaim's Submissions [22].
[38] Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; (2007) 233 CLR 115 [44] (Gleeson CJ, Gummow, Heydon & Crennan JJ).
[39] GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50; (2003) 128 FCR 1 [888] [891].
[42] Amended Defence and Counterclaim [10.4], [52].
[43] Daebo Shipping Company Ltd v The Ship Go Star [2012] FCAFC 156; (2012) 207 FCR 220 [88] (the Court).
[44] Daebo Shipping Company Ltd v The Ship Go Star [2012] FCAFC 156; (2012) 207 FCR 220 [89] (the Court); Allstate Life Insurance Company v Australia and New Zealand Banking Group Ltd [1995] FCA 1368; (1995) 58 FCR 26, 43 (Lindgren J, Lockhart & Tamberlin JJ agreeing); Fightvision Pty Ltd v Onisforou [1999] NSWCA 323; (1999) 47 NSWLR 473 [159] [171] (the Court); LED Technologies Pty Ltd v Roadvision Pty Ltd [2012] FCAFC 3; (2012) 199 FCR 204 [40] - [54] (Besanko J, Mansfield & Flick JJ agreeing).
[45] Boase v Seven Network (Operations) Ltd [2005] WASC 269 [32] - [33].
[46] O'Brien v Dawson [1942] HCA 8; (1942) 66 CLR 18, 32 (Starke J).
[47] Said v Butt [1920] 3 KB 497, 504 - 506 (McCardie J); O'Brien v Dawson [1942] HCA 8; (1942) 66 CLR 18, 32 (Starke J), 34 (McTiernan J); Rustic Haven Sdn Bhd v The Ravenswood Resort Pty Ltd (Receivers and Managers Appointed) (In Liq) [2005] WASC 88 [24] - [25] (Newnes M) and see the cases cited by his Honour at [24].
[48] Plaintiff to Counterclaim's Summary Evidence [5].
[49] Rustic Haven Sdn Bhd v The Ravenswood Resort Pty Ltd (Receivers and Managers Appointed) (In Liq) [2005] WASC 88 [17] (Newnes M); Rutherford v Poole [1953] VicLawRp 23; [1953] VLR 130, 135 (Herring CJ); Biscayne Partners Pty Ltd v Valance Corp Pty Ltd [2003] NSWSC 874 [101] (Einstein J).
[50] Said v Butt [1920] 3 KB 497.
[51] Said v Butt [1920] 3 KB 497, 503.
[52] Said v Butt [1920] 3 KB 497, 503 - 506.
[53] Said v Butt [1920] 3 KB 497, 504.
[54] Lumley v Gye [1854] EngR 95; (1854) 3 El & Bl 114; (1854) 118 ER 1083.
[55] Said v Butt [1920] 3 KB 497, 505.
[56] Said v Butt [1920] 3 KB 497, 505 - 506.
[57] Said v Butt [1920] 3 KB 497, 506.
[58] O'Brien v Dawson [1942] HCA 8; (1942) 66 CLR 18.
[59] O'Brien v Dawson [1941] NSWStRp 39; (1941) 41 SR (NSW) 295, 307 - 308.
[60] O'Brien v Dawson [1942] HCA 8; (1942) 66 CLR 18.
[61] O'Brien v Dawson [1942] HCA 8; (1942) 66 CLR 18, 32.
[62] O'Brien v Dawson [1942] HCA 8; (1942) 66 CLR 18, 32.
[63] O'Brien v Dawson [1942] HCA 8; (1942) 66 CLR 18, 34.
[64] Corporations Act 2001 (Cth) s 198A, s 248G.
[65] Plaintiff to Counterclaim's Submissions [43].
[66] Plaintiff to Counterclaim's Submissions [51].
[67] Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 485 [6] (Einstein J); see also Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 328 [65] - [68] (Einstein J).
[68] Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 328 [65] (Einstein J).
[69] Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 485 [6] (Einstein J).
[70] Imperial Oil Ltd v C & G Holdings Ltd (1989) 62 DLR (4th) 261, 266 (Marshall JA) referred to in Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 328 [57] (Einstein J).
[71] Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 328 [60] (Einstein J), referring to Cook Strait Skyferry Ltd v Dennis Thompson International Ltd [1993] 2 NZLR 72, 78 (Kennedy-Grant M).
[72] Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 328 [62].
[73] Tsaprazis v Goldcrest Properties Pty Ltd [2000] NSWSC 206.
[74] Tsaprazis v Goldcrest Properties Pty Ltd [2000] NSWSC 206 [11].
[75] Plaintiff to Counterclaim's Submissions [50] citing Whitehouse v Carlton Hotel Pty Ltd [1987] HCA 11; (1987) 162 CLR 285, 292 (Mason, Deane & Dawson JJ).
[76] Plaintiff to Counterclaim's Submissions [46].
[77] Permanent Building Society (In Liq) v Wheeler (1994) 11 WAR 187, 218 (Ipp J, Malcolm CJ & Seaman J agreeing).
[78] Plaintiff to Counterclaim's Submissions [51].
[79] See Rustic Haven Sdn Bhd v The Ravenswood Resort Pty Ltd (Receivers and Managers Appointed) (In Liq) [2005] WASC 88 [17] (Newnes M) and cases cited therein.
[80] Under the second limb of the rule in Barnes v Addy (1874) LR 9 Ch App 244.
[81] See the discussion in Hamilton v Whitehead [1988] HCA 65; (1988) 166 CLR 121, 128.
[82] M Christie SC, 'Breaches of contract by corporations - Potential liabilities of directors and controllers for inducing breach' (2013) 28 Australian Journal of Corporate Law 304, 314 - 315; see also P Watts and F M B Reynolds, Bowstead and Reynolds on Agency (Sweet and Maxwell, 19th ed, 2010) 627.
[83] Wah Tat Bank Ltd v Chan Cheng Kum [1975] AC 507, 514 - 515. Two main tests are used: whether the person 'directed and procured' the company to commit the tort (see Performing Right Society Ltd v Ciryl Theatrical Syndicate Ltd [1924] 1 KB 1, 14; Microsoft Corporation v Auschina Polaris Pty Ltd [1996] FCA 1069; (1996) 71 FCR 231, 246 (Lindgren J); Keller v LED Technologies Pty Ltd [2010] FCAFC 55; (2010) 185 FCR 449 [272] (Besanko J)) and whether the person 'made the wrongful act their own', as distinct from its being an act of the company, see, for example, White Horse Distillers Ltd v Gregson Associates Ltd [1984] RPC 61, 91; Mentmore Manufacturing Company Ltd v National Merchandising Manufacturing Company Inc (1978) 89 DLR (3d) 195, 203; King v Milpurrurru [1996] FCA 237; (1996) 66 FCR 474, 495 (Beazley J); Keller v LED Technologies Pty Ltd [2010] FCAFC 55; (2010) 185 FCR 449 [405] (Jessup J), and see also at [83] - [84] (Emmett J). In some cases, both tests have been applied (see eg Complete Technology Integrations Pty Ltd v Green Energy Management Solutions Pty Ltd [2011] FCA 1319 [99] (Kenny J).
[84] Theseus Exploration NL v Foyster [1972] HCA 41; (1972) 126 CLR 507, 514 - 515 (Gibbs CJ); Casella v Hewitt [2008] WASCA 13; (2008) 36 WAR 1 [36]; SMEC Australia Pty Ltd v Valentine Falls Estate Pty Ltd [2011] WASCA 138 [20].
[85] Further Re-Amended Defence and Counterclaim [10].
[86] Further Re-Amended Defence and Counterclaim [69].
[87] Further Re-Amended Defence and Counterclaim [68].
[88] Cf Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 328 [65] - [66] (Einstein J).
[91] Application of Michael Britton sworn 21 October 2014 in support of Application by the Second to Fifth Defendants to Counterclaim for Summary Judgment, Alternatively to Strike Out Parts of Counterclaim (Britton Affidavit) [12].
[93] Hodgetts Affidavit, Annexure GBH3.
[94] Hodgetts Affidavit, Annexure GBH3.
[95] Application of Grant Charles Jefferis Priest sworn 14 October 2014 in support of Application by the Second to Fifth Defendants to Counterclaim for Summary Judgment, Alternatively to Strike Out Parts of Counterclaim (Priest Affidavit) [14].
[98] Application of Gregory James Paramor sworn 14 October 2014 in support of Application by the Second to Fifth Defendants to Counterclaim for Summary Judgment, Alternatively to Strike Out Parts of Counterclaim (Paramor Affidavit) [22].
[118] Corporations Act 2001 (Cth) s 198A, s 248G.
[119] Application of Selwyn John Bajada sworn 14 November 2014 in support of Application by the Second to Fifth Defendants to Counterclaim for Summary Judgment, Alternatively to Strike Out Parts of Counterclaim (Bajada Affidavit) [23].
[122] Bajada Affidavit, Annexure SJB4.
[140] Bajada Affidavit [69] - [71].
[141] Bajada Affidavit [73] - [77].
[142] Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298, 309 - 310 (Menzies J) citing Holloway v McFeeters [1956] HCA 25; (1956) 94 CLR 470, 480 (Williams, Webb & Taylor JJ).
[143] Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298, 305 (Dixon CJ).
[144] Bradshaw v McEwans (1951) 217 ALR 1, 5 (the Court); Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298, 305 (Dixon CJ), 309 - 310 (Menzies J), 319 (Windeyer J); Trustees of the Property of Cummins v Cummins [2006] HCA 6; (2006) 227 CLR 278 [34] (the Court).
[145] Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298, 319 (Windeyer J).
[146] Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336, 362 (Dixon J).
[147] See Challenged Counterclaim [66.3].
[148] Second to Fifth Defendants to Counterclaim's Response to Plaintiff to Counterclaim's Summary of Evidence dated 21 January 2015 [10.1].
[149] Challenged Counterclaim par [66.1] - [66.2].
[150] Plaintiff to Counterclaim's Summary of Evidence, 9.
[152] See KCGL's Constitution rules 9.1, 9.2, 9.4 and 17.2.
[153] Plaintiff to Counterclaim's Summary of Evidence [3.2](h).
[156] Cf Corporations Act 2001 (Cth) s 198A and s 248G in relation to directors.
[158] Plaintiff to Counterclaim's Summary of Evidence [3.4](a).
[159] Plaintiff to Counterclaim's Submissions [66].
[160] Plaintiff to Counterclaim's Summary of Evidence [3.4](b).
[161] Plaintiff to Counterclaim's Submissions [66].
[162] Knights Capital Group Ltd v Bajada and Associates Pty Ltd [2016] WASC 69.
[163] Applicants' submissions [2] [29]; BA's submissions [2].
[164] Said v Butt [1920] 3 KB 497.
[165] The amended pleading was uplifted and refiled on 2 October 2014 to remedy deficiencies in the marking up of the amendments.
[166] Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S).
[167] Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S) [7] referring to Re Malley SM; Ex parte Gardner [2001] WASCA 83.
[168] Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S) [10] (citations omitted).
[169] Civil Properties Pty Ltd v Miluc Pty Ltd [2011] WASCA 195 [84] (Newnes JA, Murphy JA & Hall J agreeing).
[170] Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd [1988] FCA 202; (1988) 81 ALR 397, 401.
[171] Trafalgar West Investments Pty Ltd (as trustee for The Trafalgar West Investments Trust) v Superior Lawns Australia Pty Ltd [No 5] [2014] WASC 70 [12] (K Martin J).
[172] Civil Properties Pty Ltd v Miluc Pty Ltd [2011] WASCA 195 [86] (Newnes JA, Murphy JA & Hall J agreeing).
[173] Applicants' submissions [37], [38].
[174] Said v Butt [1920] 3 KB 497, 504 - 506 (McCardie J).
[176] Cf General Steel Industries Inc v Commissioner for Railways [1964] HCA 69; (1964) 112 CLR 125, 130 (Barwick CJ).
(2012) 207 FCR 220
(2012) 199 FCR 204
(1942) 66 CLR 18
(1994) 11 WAR 187
(1988) 166 CLR 121
(1996) 71 FCR 231
(1996) 66 FCR 474
(2006) 226 CLR 256
(2010) 241 CLR 118
(1983) 154 CLR 87
(1993) 177 CLR 598
(1997) 143 FLR 18
(2007) 233 CLR 115
(2000) 201 CLR 552
(2003) 128 FCR 1
(1995) 58 FCR 26
(1999) 47 NSWLR 473
(1987) 162 CLR 285
(2010) 185 FCR 449
(1972) 126 CLR 507
(2008) 36 WAR 1
(1959) 101 CLR 298
(1956) 94 CLR 470
(1938) 60 CLR 336
(1951) 217 ALR 1
(2006) 227 CLR 278
(1988) 81 ALR 397
(1964) 112 CLR 125